The price of bitcoin neared $68,400 on Wednesday, reaching its highest level since July and sparking a rally across the crypto sector.
Bitcoin is up more than 9% over the past week and ether is up about 7%. Other popular coins have also rallied, with solana up close to 10% in the past seven days and dogecoin up 15%.
The gains have made their way to crypto-pegged stocks. Digital asset exchange Coinbase climbed almost 7% on Wednesday, bringing its three-day rally to 19%. The stock is at its highest since August.
Bitcoin and Coinbase move higher in the last week.
One reason for bitcoin’s 53% gain so far this year is a host of new spot bitcoin exchange-traded funds that hit the market in January, welcoming in a host of new investors. Ether ETFs followed in July.
Investors have bought $1.2 billion in ETF shares in the past three days, bringing total holdings to more than $63 billion. BlackRock’s iShares Bitcoin Trust (IBIT) has accounted for more than 30% of the new purchases.
Samara Cohen, chief investment officer of ETF and index investments at BlackRock, told CNBC recently that 80% of buyers of IBIT are direct investors. Of those, 75% have never owned a BlackRock ETF, she said.
“We went into this journey with the expectation that we needed to educate ETF investors on crypto and on bitcoin specifically,” Cohen said. “As it turns out, we have done a lot of education of crypto investors on the benefits of the ETP wrapper.”
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Dutch challenger bank Bunq told CNBC that it plans to grow its global headcount by 70% this year to over 700 employees, even as other financial technology startups have decided to cut jobs.
Bunq, which operates in markets across the European Union, is looking to expand into new regions including the U.K. and the United States, taking on the fintechs already in those countries, including the likes of Britain’s Monzo and Revolut, and American neobank Chime.
Bunq said it needs corresponding talent in those regions to support its global expansion ambitions. To that end, the firm said it plans to see out the year with 735 employees globally — up 72% from its 427 members of staff at the start of 2024.
“Bunq focusses on digital nomads who tend to roam the world,” Ali Niknam, Bunq’s CEO and co-founder, told CNBC via emailed comments.
So-called “digital nomads” are defined as people who travel freely while working remotely, using technology and the internet to work abroad from hotels, cafes, libraries, co-working spaces, or temporary housing.
“We’d love to be able to service our users wherever they go — given the regulatory environment we’re in, this results in us having to have a lot of extra people to make this happen,” Niknam added.
Bunq is currently in the process of applying for banking licenses in both the U.S. and U.K. Last year, the firm submitted an application for a federal banking license. And in the U.K., Bunq is awaiting a decision from financial regulators on an application to become a licensed e-money institution, or EMI.
The digital bank said it was actively looking to hire across sales and business development, product marketing, PR, affiliate marketing, and market analysis, as well as user support, development, and quality assurance.
Many of these positions will be part of a “tailored digital nomad” program that allows staff to work from anywhere in the world, Bunq said.
However, the firm stressed it’s not closing down office space and that many new hires would work in its offices, including in Amsterdam, Sofia, Istanbul, Munich, Paris, Dublin, Madrid, London, and New York City.
Over the past two years, one of the biggest stories in both the fintech and broader technology industry has been companies slashing jobs to cut back on the massive spending implemented during in the pandemic years of 2020 and 2021.
The operating environment for fintech firms has gotten tougher, meanwhile, with inflation knocking consumer confidence and higher interest rates making it harder for startups to raise money.
Meanwhile, some fintechs are looking to artificial intelligence to take on a growing number of roles.
Swedish buy now, pay later firm Klarna, for instance, said last month that it was able to reduce its workforce from 5,000 to 3,800 over the past year from attrition alone. It added that it is looking to further cut employee numbers down to 2,000 through the use of AI in marketing and customer service.
“Our proven scale efficiencies have been enhanced by our investment in AI, which has driven down operating expenses and improved gross profits,” the company said in first-half earnings.
Klarna said that its average revenue per employee had risen 73% year-over-year, thanks in no small part to the internal application of AI.
Bunq’s Niknam said he doesn’t see AI as a way to help firms reduce headcount, however.
“We’ve been deploying AI systems and solutions years before they became mainstream, [but] in our experience AI empowers our employees to be able to do better by our users, more effectively and efficiently,” he told CNBC.
Bunq earlier this year reported its first full year of profitability, generating 53.1 million euros ($58.51 million) in net profit in 2023. The business was last valued privately by investors at 1.65 billion euros.
Bitcoin jumped Monday evening and topped $57,000 after Wall Street’s rebound from its worst week of the year.
The price of the flagship cryptocurrency was last higher by 5.6% at $57,4449.00, according to Coin Metrics. Last week, bitcoin tumbled 9% for its worst weekly performance since August 2023.
Bitcoin performance in the past five days
In regular trading, Coinbase and MicroStrategy climbed 5.2% and 9.2%, respectively, on Monday. Those stocks rose as the S&P 500 broke a four-day losing streak and the Nasdaq Composite gained more than 1%. The three major averages last week posted their worst weekly performance in 2024.
Bitcoin has been trading range bound for most of the year. Last week, it briefly fell below its floor of about $55,000. Analysts have warned that cryptocurrency lacks major catalysts at the moment and that in their absence, prices are likely to be sensitive to macro factors and continue to consolidate.
Seasonality is also a factor. For bitcoin, similar to other risk assets, September is a historically weak month.
“For bitcoin to experience some upside in the upcoming week, it is essential for the U.S. equity markets to find some stability or positive momentum, potentially leading to a decrease in [crypto] ETF outflows,” Bitfinex analysts said in a note Monday. “This relief in the equity markets could help alleviate selling pressure on bitcoin, providing a conducive environment for a recovery.”
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Republican presidential nominee and former U.S. President Donald Trump walks off stage after speaking at a campaign rally at the Van Andel Arena in Grand Rapids, Michigan, on July 20, 2024.
Anna Moneymaker | Getty Images
NASHVILLE — Former President Donald Trump said that if he were returned to the White House, he would ensure that the federal government never sells off its bitcoin holdings. But he stopped short of proposing a formal federal reserve of digital currency.
“For too long our government has violated the cardinal rule that every bitcoiner knows by heart: Never sell your bitcoin,” Trump said during his keynote speech at this year’s Bitcoin Conference in Nashville, the biggest bitcoin conference of the year.
The former president’s remarks cameas the race to capture the votes and the campaign cash of America’s frontline fintech adopters takes center stage in the 2024 presidential contest.
“This afternoon I’m laying out my plan to ensure that the United States will be the crypto capital of the planet and the bitcoin superpower of the world and we’ll get it done,” Trump said.
But Trump’s pledge to simply maintain the U.S. government’s current bitcoin holdings was a less radical pitch to the crypto crowd relative to other proposals at the conference.
Third-party candidate Robert F. Kennedy Jr., for instance, during his Friday Bitcoin Conference speech promised to launch a reserve of 4 million bitcoin, starting with the bitcoin holdings that the U.S. government already has stockpiled from criminal seizures. Kennedy said he would mandate the government purchase 550 bitcoin a day until the reserve reached 4 million.
Shortly after Trump’s speech, Sen. Cynthia Lummis, R-Wy., read out her own legislative proposal to amass an official U.S. federal reserve of 1 million bitcoin over five years.
“It will be held for a minimum of 20 years and can be used for one purpose: Reduce our debt,” Lummis said.
The price of bitcoin briefly dipped during Trump’s speech, but recovered and was up slightly for the day, as of 5:15 p.m. E.T.
Throughout his remarks, the former president worked to draw contrasts between the Republican Party’s growing embrace of crypto versus the hardline regulatory approach that has characterized the Biden administration.
“The Biden-Harris administration’s repression of crypto and bitcoin is wrong and it’s very bad for our country,” Trump said. “Let me tell you if they win this election, every one of you will be gone. They will be vicious. They will be ruthless. They will do things that you wouldn’t believe.”
Trump went on to list a series of crypto-friendly promises to a crowd of cheering bitcoin supporters, promising to dismantle what he called the “anti-crypto crusade” of President Joe Biden and Vice President Kamala Harris.
“On day one, I will fire Gary Gensler,” Trump said, referencing the Biden-appointed chairman of the Securities and Exchange Commission who has taken an aggressive approach to crypto regulation.
The president does not have the power to fire appointed commissioners. Even if Trump were to appoint a new SEC chairman, Gensler would remain a commissioner on the independent agency.
The former president also pledged to create a “bitcoin and crypto presidential advisory council.”
“The rules will be written by people who love your industry, not hate your industry,” Trump said.
The Republican presidential nominee also held an accompanying fundraiser in Nashville, with tickets topping out at $844,600. In June, BTC Inc. CEO David Bailey, who organized the conference, pledged to raise $100 million and turn out more than 5,000,000 voters for the Trump re-election effort, as the bitcoin sector increasingly turns to the Trump camp for support.
Trump taking the main stage to directly address the bitcoin community is the latest in a months-long campaign to appeal to the crypto contingent, including accepting donations in virtual tokens, pledging to end President Joe Biden’s “war on crypto,” and advocating that all future bitcoin be made in America. It is also quite the about-face by the Republican presidential nominee.
Trump very publicly dismissed bitcoin when he was in the White House. In July 2019, he said he was “not a fan” of bitcoin and other cryptocurrencies. He said that tokens aren’t money, that their value was “based on thin air,” and warned that unregulated crypto assets could help facilitate the drug trade, among “other illegal activity.”
“Bitcoin just seems like a scam,” he told Fox in a phone interview in 2021. “I don’t like it because it’s another currency competing against the dollar.”
“I want the dollar to be the currency of the world, that’s what I’ve always said,” continued Trump in his conversation with Fox.
But five years, a lost presidential election, and millions of dollars from the crypto lobby later, the Republican presidential nominee sung the praises of the digital currency at the biggest bitcoin conference of the year in Nashville, which kicked off on Thursday.
“Bitcoin stands for freedom, sovereignty and independence from government coercion and control,” Trump said during his keynote speech.
Trump’s shift on bitcoin comes as the Republican Party pledges to lift the red tape of the Biden-Harris administration, working to turn crypto regulation into a voting issue for November, especially as inflation consistently ranks as a top voter priority in polls.
As crypto lobbyists and supporters become more of a presence in Washington, it raises questions on whether the Democratic Party will dig into the hardline regulatory approach of the past several years or ease its position.
“Every presidential candidate needs to understand, digital asset, pro-innovation voters are here to stay,” Democratic Rep. Wiley Nickel of North Carolina told CNBC in an interview, adding that crypto regulation should not become a “partisan political football.”
“I want to keep this as a bipartisan issue. I don’t want Donald Trump to politicize this issue,” Rep. Nickel said.
Rep. Ro Khanna, D-Ca., echoed Rep. Nickel’s sentiment, saying that crypto should not turn into a partisan talking point but will require regulation like any technology.
“I don’t really see why it’s partisan. Being against bitcoin is like being against cell phones. It’s like being against AI. It’s like being against laptops,” Khanna told CNBC. “It’s a technology. Have thoughtful regulation on the technology, but it’s a technology that has appreciated from about $10,000 to $80,000.”
Reps. Khanna and Nickel were two of the only Democrats to attend the Bitcoin Conference.
Bitcoin 2024 conference organizers say they were briefly in talks to have Vice President Kamala Harris appear at the conference, though she ultimately declined. But billionaire businessman Mark Cuban posted on X that the Harris campaign had reached out with questions about crypto, so it appears the vice president is looking into this space and potentially figuring out where her policies, if elected president, could land.
“I think we’re going to hear from Vice President Harris soon on this. And I’m very optimistic we’re gonna get a reset. And that I think, will matter in a major way,” Rep. Nickel said. “This issue isn’t going anywhere. And we’ve got to make sure we continue to embrace this in bipartisan way.”
Harris’ team has already begun to reach out to people close to crypto companies to set up meetings, the Financial Times reported on Saturday.
The recent thaw in Trump’s sentiment for the digital asset space has coincided with a sudden influx of interest and cash from the country’s top tech talent.
He has raised more than $4 million in a mix of cryptocurrencies, including bitcoin, ether, the U.S. dollar pegged stablecoin USDC, and various memecoins, with contributors hailing from 12 states, including a few battlegrounds.
Crypto billionaire twins and venture investors Tyler and Cameron Winklevoss led the charge, each contributing 15.57 bitcoin, or just over $1 million at the time of their donation, according to a filing with the Federal Election Commission — though they received a partial refund, because contributions surpassed the $844,600 limit.
There are a number of other venture capitalists who are pro-crypto, and they’ve pledged millions to the Trump campaign, as well.
Venture capitalists Marc Andreessen and Ben Horowitz told employees of Andreessen Horowitz (a16z) that they plan to make significant donations to political action committees supporting Trump’s campaign. The partners of Sequoia Capital are backing Trump, as is venture investor David Sacks, who helped the former president raise $12 million at a fundraiser he hosted in his San Francisco home. The chief legal officers for centralized crypto exchange Coinbase and blockchain giant Ripple were both there.
These members of the tech elite are also heavily contributing to pro-crypto super PACs like Fairshake, which has raised more than $200 million dollars to elect pro-crypto candidates up and down the ballot, and on both sides of the aisle.
But reporting from NBC News finds that the vice president’s team is looking to win over support from some of big tech’s undecided donors, many of whom remained on the sidelines while President Joe Biden remained in the race. Their tune may be changing now that the vice president is the de facto nominee for the party.
It helps that Harris has a long track record in California.
She has been fundraising in the tech community for years, including from those working at Amazon, Alphabet, Microsoft and Apple.
“The pivot that has occurred in the last three days is dramatic,” Steve Westly, a venture capitalist and one-time gubernatorial candidate for California, told NBC News. “I don’t think I’ve ever seen such a surge of enthusiasm in any campaign I’ve been involved with.”
This comes as Trump’s running mate for vice president, JD Vance, is set to hold a fundraiser of his own in Palo Alto on Monday.
— CNBC’s Rebecca Picciotto contributed to this report.
Former U.S. President and Republican presidential candidate Donald Trump attends a campaign event in Philadelphia, Pennsylvania, U.S., June 22, 2024.
Shannon Stapleton | Reuters
Former President Donald Trump will headline a campaign fundraiser in Nashville on the sidelines of the Bitcoin Conference, where the top ticket is going for $844,600 per person.
According to an invitation shared with CNBC, the July 27 event will coincide with Trump’s expected keynote speech at the conference, the country’s biggest gathering of cryptocurrency fans.
The top-tier tickets, which include a seat at a roundtable with Trump, are priced at the maximum donation amount permitted for individuals to give to Trump and the Republican party’s largest joint fundraising committee, known as the Trump 47 Committee.
A next level down includes a photo with the former president at $60,000 per person or $100,000 per couple, according to the invitation.
Trump signed on to headline the Music City Center gathering shortly before he survived an attempted assassination on July 13.
A spokesman for the Trump campaign did not respond to a request for comment on his Nashville appearances.
In recent months, Trump has positioned himself as the pro-crypto candidate for president, a reversal from his previous stance during his time in the White House.
In April, Trump launched his latest non-fungible token collection on the solana blockchain in April and has been making increasingly bullish comments on crypto since then.
The Trump campaign team is accepting digital currency donations, and he has personally pledged to defend the rights of those who choose to self-custody their coins, meaning that they don’t rely on a centralized entity like Coinbase to hold their tokens and instead, do it themselves in personal crypto wallets, which are sometimes outside the reach of the Internal Revenue Service.
Trump also vowed at the Libertarian National Convention in Washington in May to keep Sen. Elizabeth Warren, D-Mass., and “her goons” away from bitcoin holders.
Meanwhile, following a meeting at Mar-a-Lago with about a dozen bitcoin mining executives who pledged cash and votes to him, Trump declared that all future bitcoin will be minted in the U.S., should he return to the White House.
On Monday, the Republican presidential nominee named Ohio Senator JD Vance as his running mate — a move viewed by many as a net win for the crypto sector. Vance has advocated for looser regulation of crypto and disclosed in 2022 that he personally holds bitcoin.
It comes in stark contrast to the Biden White House, which has taken a consistently skeptical approach to crypto regulation. Under Biden, the Securities and Exchange Commission has dialed up actions on the sector.
In the absence of hard-and-fast rules from Congress, the U.S. has proven to be one of the most active enforcers of penalties and legal challenges against crypto companies.
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This election cycle, the crypto contingent has become a key pipeline for cash — and votes.
One day after Trump named Vance to his ticket, venture capitalists Marc Andreessen and Ben Horowitz told employees of Andreessen Horowitz that they plan to make significant donations to political action committees supporting Trump’s campaign.
“They’re losing almost all these lawsuits, but the problem is that when you’re a startup, you don’t have the money to fight the U.S. government. And so they’re kind of nuking the industry in that way,” he said.
Fairshake, a super PAC backed by crypto’s top companies is now one of the top-spending PACs in this election cycle. Of the $160 million in total contributions it has raised, 94% can be traced back to just four companies: Ripple, Andreesen Horowitz, Coinbase and Jump Crypto.
Charles McManus, CEO of ClearBank, speaks at the Innovate Finance Global Summit in April 2023.
Chris Ratcliffe | Bloomberg | Getty Images
ClearBank, a British financial technology firm powering payments for the likes of Coinbase, scored its first full year of profit after higher interest rates helped drive a 91% jump in revenues.
The firm swung to an £18.4 million ($23.3 million) pre-tax profit in the year ending Dec. 31, 2023, according to financial statements released Thursday. That’s up from a £7.1 million loss in 2022.
The bank first reached profitability on a monthly basis in November 2022. This is the first time it has reported profitability on an annual basis.
ClearBank’s first profit comes on the back of a near doubling of its total income. ClearBank saw overall revenue jump 91% year over year in 2023 to £111.3 million.
The firm benefited heavily from high interest rates, which have driven a spike in deposits as consumers and businesses look to gain more bang for their buck by storing cash in interest-bearing accounts.
Tide, one of ClearBank’s major customers in the U.K., has been offering a 4.33% interest rate for its business customers, with advertising across buses and London Underground trains promoting the punchy offer.
Charles McManus, ClearBank’s CEO, told CNBC that the firm was a clear beneficiary of higher rates — but was quick to stress ClearBank isn’t reliant on interest income and that transaction revenue has been growing healthily as well.
There was “no single driver” of ClearBank’s positive performance in 2023, McManus said, adding ClearBank benefited from a number of things, such as its clearing business for authorized electronic money firms and growth in the use of bank-to-bank payment services amid higher credit card fees.
“We’ve built the bank and the business model over a number of years,” McManus told CNBC in an interview. “You’re seeing flavors of it across our business lines.”
However, it’s hard to avoid the fact that higher deposits were a key driver of ClearBank’s performance for the year. The firm says net interest income grew by 142% to £81.9 million, as deposits reached £6.1 billion.
One key driver of deposit growth for ClearBank last year was the collapse of Silicon Valley Bank, a key bank used by fintech startups and venture capitalists. The U.K. ring-fenced division of Silicon Valley Bank, HSBC UK Bank, was bought by British banking giant HSBC for £1 and renamed HSBC Innovation Banking.
This drove a rise in deposits for ClearBank, as customers of SVB fled for alternatives.
“The market [has been] under stress in relation to credit, and banks are going bust, whether it’s Europe, the U.S., or concerns in the U.K. And because of the business model in relation to cash, it being a safe haven,” McManus said.
“Rather than just be a safe haven that cash is collateral for the pain schemes,” McManus added. “The more payments we do, the more cash that we actually need to hold as collateral for our clients for Faster Payments,” which is the U.K.’s scheme for sending electronic, sterling payments in an instant.
“Our customers have actually left more cash with us rather than take the the fractional banking risk in relation to Barclays through those stress periods,” McManus noted.
Founded in 2015, ClearBank is a regulated clearing bank and payments institution in the U.K. It provides banking services to the likes of Coinbase, as well as other fintechs like savings apps Chip and Raisin, and business banking startup Tide.
All funds stored in ClearBank accounts are held at the Bank of England, meaning clients holding their money with firms powered by ClearBank’s technology can benefit from high yields on their cash.
ClearBank posted gross fee income of £31.4 million in the full year, with reccurring platform a key driver. Embedded banking end-customers, or customers of ClearBank’s customers, grew 93% year over year to 1.2 million.
McManus said that ClearBank is in no rush for an initial public offering, adding that it already has a substantial amount of cash on its balance sheet. In 2022, ClearBank raised £175 million in a financing round led by private equity firm Apax Digital.
ClearBank’s chief said it was important that the firm completes an expansion to the U.S. market before deciding on a public listing. He added that a plunge in shares of Cab Payments, a U.K.-listed payments firm, has made it unattractive for a company like his to decide on a listing in the near term.
ClearBank is currently pursuing a European Union banking license via the Dutch central bank. The firm was hoping to have its license application completed by 2023, but now says it expects to obtain its full EU banking license later this year.
McManus said that Brexit has played a role in the firm’s struggle to get a banking license in the EU, as ClearBank is “being looked at very closely in relation to all of that.”
The U.K.’s decision to quit the EU has made it harder for British fintech firms seeking to expand operations in the bloc, as with Britain no longer in the EU single market, financial firms can no longer offer “passporting” rights which allow companies to operate a single U.K. license across all EU member states.
AUSTIN — There is a sort of clubhouse for Austin’s bitcoin believers on the second floor of the Littlefield Building at the corner of Congress Avenue and Sixth Street. The hideaway is at the crossroads of two worlds — the majestic thoroughfare that leads to the Texas State Capitol and the iconic, albeit notorious, stretch of bars, restaurants, and live music that define the capital’s party vibes. It’s an apt metaphor for the space itself.
The Bitcoin Commons is, at once, many things.
By day, it functions as an open plan, fluorescent-lit co-working space for the more corporate-minded bitcoin operators, but at night, it moonlights as a safe space for underground meet-ups of the industry’s rogue actors. Periodically, it plays host to conferences that draw in a mix of attendees ranging from venture capitalists to armed preppers living entirely off the grid. And on some afternoons, once happy hour hits, the kitchen at the back is retrofit with a stowaway bar.
“We also fund developers, and we help them advance their projects,” said Parker Lewis, one of the stewards of the Commons, as well as the author of a new book on bitcoin called “Gradually, Then Suddenly.”
“We help advance bitcoin through education and actually developing the monetary network, the code base, and the applications,” said Lewis, who is widely considered to be one of Texas’ de facto bitcoin ambassadors.
Francisco Chavarria was born in Mexico City and spent time in Salt Lake City, but three years ago, he made the move to Austin to be a part of a community of like-minded thinkers. His company, Yopaki, which is a neobank for bitcoin focused on the Latin American market, just won first place in a hackathon put on at the Commons.
“If you talk to other builders in the competition, a lot happens here,” said Chavarria. “There definitely is a sense of, ‘I don’t need for others to lose for me to win.’ There really is a relationship and a collaboration for bitcoin to succeed.”
“Right now it feels like we’re all winning because of the price, but those of us who have been building in the bear market, we know,” Chavarria added.
Austin’s “Bitcoin Commons” hosts regular meetups and conferences for the city’s bitcoiners.
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Bear or bull market, bitcoiners have flocked to Austin because of a combination of pro-crypto policies, abundant, renewable energy, and an ever-growing network of some of the brightest developers and miners on the planet. And even in the price doldrums, they typically bring the same level of enthusiasm to the conversation — though bitcoin’s recent stretch of record-breaking price moves has gone a long way toward boosting morale.
In March, bitcoin hit multiple, fresh all-time highs, as trader enthusiasm for the digital asset sector soared. A lot of that price run-up has to do with the record flows into the newly-launched spot bitcoin exchange-traded funds in the U.S., led by the world’s largest asset manager Blackrock and its $15.5 billion iShares Bitcoin Trust, which have helped to solidify bitcoin’s place as an asset class that’s here to stay.
Collectively, these spot ETFs have brought in around $60 billion, and in some cases, they have been breaking records for ETF flows altogether.
“The biggest driver is certainly the ETF flows, which have surpassed the expectations of all but the most bullish pundits,” said Castle Island Venture’s Nic Carter of bitcoin’s record price moves this month. “And these blockbuster flows have materialized before the major wirehouses, asset managers, and RIAs have actually approved the ETF for their clients.”
Carter added that there is also new liquidity coming into bitcoin from Asian markets via two main pathways: bitcoin’s version of non-fungible tokens known as ordinals, as well as bitcoin-issued coins called BRC20 tokens.
In the last 20 years, Austin has matured into one of the country’s leading tech centers, a trend accelerated by the Covid pandemic, which saw industry leaders migrate en masse from California.
“Bitcoin was founded in 2009. A lot has happened post-financial crisis. Austin was already emerging as a tech center, and you know, enter bitcoin, and it just became the logical home,” said Lewis, who runs business development at Zaprite, a bitcoin-native financial services firm.
It helps that Texas is a libertarian-friendly state that actively supports free market policies. It has proven to be a big draw for a group of people who think of bitcoin as a way of life — that is, a monetary network that is decentralized, borderless, and doesn’t answer to central banks or governments.
Austin’s “Bitcoin Commons” draws in an eclectic mix of people, including venture capitalists, bitcoin miners, and coders.
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Many hardcore bitcoiners ironically embrace the term maximalist or maxi as a way to self describe. In Texas, though maxis exist along a professional spectrum from venture capitalists, to miners, coders, company executives, and generalist techies, the eclectic tribe have a few things in common. Many are family-oriented, patriotic carnivores with an aversion to the overreach of government and a strong belief in the right to bear arms, among multiple other personal, individual liberties.
Bitcoin’s eponymous Austin lair, which is adorned with the Texas state flag and bitcoin memorabilia, has adopted Chatham House rules for many of its events to protect the identities of those conversing within its walls. One such meetup is the monthly BitDevs (short for bitcoin developers) gathering, where bitcoin builders, investors, and the bitcoin curious are all welcomed, so long as no pictures or videos are taken.
At these meetings, topics run the gamut, from detailed discussions about code to concerns that the Microsoft-maintained GitHub may pose a greater existential threat to the bitcoin network since much of the development work and conversations among coders happen on that platform. At one such gathering, the moderator of the two-hour session asked the room who ran a bitcoin node. More than half of the people in attendance raised their hands.
After attending multiple Austin BitDev meetups over the last three years, a few common conversation themes have emerged, including the focus on identifying threat vectors to the network and brainstorming workarounds. Beyond software, there are also concerns over hardware vulnerabilities, given that the ASIC chip used in bitcoin mining rigs are manufactured out of China, a country which has proven hostile to the crypto sector in recent years.
The “Bitcoin Commons” functions as a sort of clubhouse for the city’s bitcoin believers. It puts on a mix of programming, including conferences and hackathons, as well as hosts a co-working space by day.
The Commons hosted a hackathon, BitDevs, and a one-day conference dubbed the Bitcoin Takeover on the sidelines of the annual South by Southwest tech festival, which put on virtually no crypto programming this year.
Across those multiple gatherings, there was a newfound interest in talking about the burgeoning ecosystem of projects building on top of bitcoin’s blockchain, which began to heat up with the introduction of ordinals in Jan. 2023 — bitcoin’s version of non-fungible tokens.
One underrated driver of bitcoin’s recent rally is new programming innovations that may allow it to reach technological parity with ethereum. These advancements involve beefing up the bitcoin ecosystem with tools like smart contracts, which are programmable pieces of code that help to eliminate middlemen like banks and lawyers from transactions. That makes it easier for developers to create products and applications for consumers.
BitVM, for example, has a promising plan to do just that. It is ultimately trying to bring smart contracts to the bitcoin network, which has helped spur this renaissance of interest in layer two technology — that is, the startups being built on top of bitcoin’s base chain.
“I’ve never seen deal pacing move this aggressively in the bitcoin space in my entire career,” Carter tells CNBC.
Indeed, the VC appetite for these layer two bitcoin projects has been picking up in the last few months.
PitchBook says that the fourth quarter of 2023 was the first time in almost two years that deal value in the crypto sector had increased, reaching $1.9 billion — up 2.5% from the previous quarter. While still well off the 2021 high of $31 billion, funds are building back interest, and trust, in the space.
Grant Gilliam spent 15 years working in private equity in New York before pivoting to run a bitcoin VC fund called Ten31. This investment platform, which is focused exclusively on bitcoin, has invested $125 million of equity in aggregate since launching five years ago. More than $100 million was deployed in the last two years during the bear market.
“We invest across the bitcoin ecosystem across every major theme,” Gilliam told CNBC. “Anything that is relevant to bitcoin infrastructure, we like to say the picks and shovels of companies building products and services for holders of bitcoin.”
Gilliam, who spent a few years commuting from New York to Austin every month for the BitDevs meetup, said that some of the layer two bitcoin investments are more hype than substance, but he’s still bullish overall on the deal space.
“There’s been a lot of L2 hype lately, mainly driven by the ordinals, and inscriptions, developments or innovations, if you want to call it that,” Gilliam said. “There’s a lot of activity in that right now, but we haven’t been as focused on that. It’s our firm view that the ordinals will prove to be a passing fad.”
Gilliam says that Ten31 is focused on basic building blocks of the ecosystem, such as companies that are providing financial services, which could be custody trading and lending, or projects that are working to scale the lightning network.
Lightning, with is the layer two payment technology meant to realize bitcoin’s original vision of being peer-to-peer cash continues to struggle with the issue of reaching scale. Developers tell CNBC that a lot of engineering work remains to close that gap.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
“Number go up” is a big mantra among bitcoiners, but as the community evolves, so too does the thinking about the price of the coin.
“Price is really an output of many inputs of human beings, building tools to make bitcoin both more secure and a greater utility,” Lewis said. “Price is the best indicator of more people coming to the conclusion that bitcoin is money, and it’s a better store of value, so it is very relevant.”
Every four years, bitcoin undergoes a market making event known as the halving. It cuts the production of new bitcoin in half, and it has typically come before a major run-up in the price of bitcoin.
Miners from around the world flocked to Texas when China banned the practice in 2021, attracted by the abundant renewable energy and a grid that’s friendly to flexible buyers of power — both ideal conditions for miners.
In April, however, the profits for these bitcoin miners will be cut in half.
For some, it may prove an Armageddon-level event. Others have braced for impact by swapping out their fleet of machines for more efficient rigs. The price run-up in bitcoin has also helped to give some of these companies a buffer in their profit margins.
West Texas miner Jamie McAvity has 60 megawatts at his mining site. It runs on a part of the grid that is 90% powered by a mix of solar and wind power.
“If you’ve been in for more than one cycle, you have situated yourself in a place where you can resist the halving to the best of your ability,” McAvity told CNBC at Austin’s Bitcoin Commons.
McAvity, who previously worked for ten years as a trader on the floor of the New York Mercantile Exchange, added that ETF flows have helped to change the pricing dynamics for the world’s largest coin.
“The spot ETF inflows are so massive that reducing the available supply of newly mined bitcoins from 900 to 450, is probably going to be immaterial relative to that,” he said.
“But who knows, the ETFs could cool off for a while, and it’s hard for someone to credibly say that a reduction in supply is not going to change the market price equilibrium, because that’s a fundamental principle of market economics,” he added.
A ten minute walk west from the Bitcoin Commons is the Austin Proper Hotel, a five-star establishment where the lighting is intentionally dim to strike a certain mood. Here, the Boys Club, a popular and buzzy, female-led organization which self-describes as a “social collective bringing new voices to the new internet” put on its own crypto conference on the sidelines of South by Southwest.
The Boys Club caters to a more blockchain agnostic crowd, where the focus is less on exclusivity to one coin or chain — and more about borrowing the best features from across the ecosystem to solve problems in the real world.
CNBC caught up with Micha Benoliel at the one-day summit. Benoliel built Nodle, a decentralized wireless network that’s now getting into the business of using the blockchain to battle AI-powered deepfakes.
“Blockchain is the only way to make a record that is immutable, and is going to prove the time at which this photo has been taken, or video, and also to help you prove the location and other elements that are going to reinforce that proof, so it creates a real immutable proof of authenticity,” he said.
The Boys Club put on its own Austin summit on the sidelines of SXSW with programming on the new internet, crypto, and digital culture.
CNBC
The one-day popup event gathered together more of a web3 crowd to talk about everything from the latest trends in tokenization to the resurgence of on-chain meme culture.
Similar to other bull runs in the price of bitcoin, some altcoins have seen a meteoric rise alongside blue chip names in crypto, because they’re seen as a comparatively cheaper buy.
Dogecoin, a meme-coin that was started as a joke, now has a market cap of nearly $25 billion, placing it in the top ten most valuable cryptocurrencies on the planet. Boden, a coin named after President Joe Biden, saw a run-up of more than 800% in a six-hour window after Super Tuesday, and the newly popular DogWifHat is collectively worth more than $2 billion.
Typically, this is the bellwether of a peak bubble moment, but analysts say that despite frothy conditions, this bull run is different to past cycles.
The price of bitcoin is cyclical, and it sees price run-ups roughly every four years. Each time, the price floor is higher. What’s also a departure this time around is the fact that institutional money is here in a way that it hasn’t been during past bull runs.
Fundamentals in the crypto market are playing a big role, as well.
In a note from JPMorgan on Mar. 15, analysts credit ether, the world’s second-biggest crypto token by market cap, for being a significant driver of crypto’s recent gains, including Coinbase‘s stock price rise. Ether has rallied nearly 50% so far this year, recently breaching the $4,000 price level and outpacing bitcoin’s returns, before paring back some gains.
“While the focus of the cryptocurrency marketplace has been the net new money going into U.S. spot Bitcoin ETFs and the positive impact on Bitcoin token prices (here, the spot Bitcoin ETF and its ultimate launch in January has driven the cryptoecosystem over the past several months), we see impact of ETH appreciation also as particularly meaningful,” JPMorgan wrote.
Regulators in the U.S. remain a universal concern for the crypto sector, especially amid reports of the Securities and Exchange Commission probing crypto companies building on the ethereum network.
Still, many in the space, including coders and investors remain optimistic.
Ethereum, the blockchain that underpins ether, underwent a major upgrade on Mar. 13 dubbed Dencun. Developers told CNBC it was expected to slash transaction fees by up to 90%. That is game-changing not just for the end-users, but also for the coders building apps on top of ethereum.
Base, crypto exchange Coinbase’s self-built layer two network, is ethereum-based and allows developers to more easily build decentralized apps. Coinbase’s Base lead, Jesse Pollak, anticipates this will open the door to applications in both the gaming and decentralized social media arena now that it is no longer nearly as cost prohibitive to build these types of programs.
“The thing that is happening with Dencun is we’re going to create a whole new kind of storage on ethereum that’s purpose built for Layer 2s like Base,” Pollak told CNBC.
“That means that right now we pay a ton to ethereum, and we’re going to pay a lot less, which is going to lower the fees for everyone. Because ethereum is basically going to build a product purpose built for us,” continued Pollak.
Chris Dixon, crypto chief at venture firm a16z, echoed that sentiment, noting that part of their portfolio is focused on these startups.
“The core idea is that if you build a social network, or a game or a financial service, on top of the blockchain, it has all sorts of benefits where the money and control flow out to the users and the creators that access the network, as opposed to the companies that control it,” said Dixon. “In the same way that steel was a better way to build bridges and buildings than wood was in the Industrial Revolution, blockchains are a building material.”
The eToro logo is seen during the 2021 Web Summit in Lisbon, Portugal.
Pedro Fiúza | Nurphoto | Getty Images
Stock brokerage platform eToro is getting interest from bankers and investors about a public market listing after its scrapped plans to go public via merger with a blank-check company, CEO Yoni Assia told CNBC.
“We definitely are eyeing the public markets,” Assia told CNBC in an exclusive interview last week. “I definitely see us becoming eventually a public company.”
“When is the ideal time to do that? We’re always evaluating the right opportunity at the right time and the right market,” he added.
Assia said that his brokerage company has built good relationships with exchanges, including the Nasdaq stock exchange.
EToro has already put the work in toward becoming a public company, he suggested, and the question of listing is more a matter of when, not if.
“It’s our business, right? Retail investors come to eToro to buy shares of a public company. So we’re happy to engage and build those relationships over time as we scale more.”
Figures shared by eToro with CNBC exclusively show that the firm recorded $630 million in revenue in 2023, more or less matching the $631 million in revenue it attracted in 2022.
But the company reported more than $100 million in EBITDA (earnings before interest, tax, depreciation, and amortization), an impressive margin for a retail brokerage business.
The company did not provide a comparable profit figure for 2022.
EToro relies mainly on fees related to trading, like spreads on buy and sell orders, as well as fees for non-trading activities like money withdrawals and currency conversion.
EToro now has 35.5 million registered users, and over 3 million funded accounts. The company crossed $10 billion in total customer assets under administration in 2023, according to its financials.
Assia also disclosed that eToro has purchased a company called Deep, which focuses on content automation.
This is an area the company plans to focus on heavily in 2024.
Assia said eToro has been using AI heavily in its business, particularly in content and marketing. Around 80% of all of eToro’s marketing context, graphics, content, and localization integrates AI, he added.
AI is also serving a use case in investing and trading, according to Assia, with the company focusing heavily on integrating this into the product experience.
AI-related stocks, meanwhile, have generated a great deal of buzz among eToro’s userbase.
“If we think about AI, and what is the holy grail of AI for our customers, it’s obviously generating alpha in the markets,” Assia told CNBC.
AI has become a buzzy area for investors following the explosion of interest surrounding ChatGPT, the AI chatbot developed by Microsoft-backed company OpenAI.
EToro, which lets users buy and sell stocks via an online platform, was originally meant to go public through a combination with the special-purpose acquisition company, or SPAC, FinTech Acquisition Corp â which belonged to Bancorp founder Betsy Cohen.
A SPAC is effectively a listed shell company that’s set up with the aim of taking another target company public. The trend was immensely popular during a boom in such listings in 2020 and 2021 that saw companies from Virgin Orbit to Cazoo go public in much-hyped deals. The hype has since faded.
But eToro shelved these plans, which would have given the company a valuation of $8.8 billion.
Assia, who claims to have begun his trading journey from an early age, said eToro has learned a lot from the experience, which saw FinTech Acquisition Corp plummet and eventually dissolve and liquidate.
“We’ve learned a lot from the experience, looking at public markets in the U.S. and seeing sort of the bubble burst,” Assia told CNBC.
“We said 2022 is the year of education for customers to understand that the markets don’t always go up,” Assia said. “And I think 2023 is probably an educational year around the globe.”
“When everybody’s pessimistic is when markets actually do go up.”
Since its shelved listing plans, eToro in March 2023 raised $250 million at a $3.5 billion valuation in a deal backed by SoftBank Vision Fund 2, ION Investment Group, and Velvet Sea Ventures.
Financial technology companies have had a tough time over the last couple of years following a spike in interest rates, which have clobbered some risk assets. More recently, companies have seen a better time in the public markets, with shares of Affirm and Coinbase up 172% and 165%, respectively.
That hasn’t yet translated into private markets which, on the whole, remain depressed from levels reached during the height of the 2020 and 2021 fintech boom.
Assia noted that retail investors aren’t quite yet back in full in the stock market, and are still facing challenges given the higher cost of living.
However, he expects things to improve in 2024 with the expectation that interest rates will be lowered by the U.S. Federal Reserve.
Assia said eToro was focused heavily on product in 2023, prioritizing things like a better advanced trading experience and technical analysis features for its more hardcore user base.
INDIA – 2021/10/16: In this Photo illustration a Bitcoin logo seen displayed on a smartphone with an ETF(exchange traded fund) logo in the background. (Photo Illustration by Avishek Das/SOPA Images/LightRocket via Getty Images)
Sopa Images | Lightrocket | Getty Images
Social media company X said late Tuesday it has completed a preliminary probe into the compromised account of the U.S. Securities and Exchange Commission that displayed a false post claiming the SEC had approved bitcoin ETFs for trading.
“Based on our investigation, the compromise was not due to any breach of X’s systems, but rather due to an unidentified individual obtaining control over a phone number associated with the @SECGov account through a third party,” said X, formerly Twitter, in the post, confirming that the SEC’s account was compromised.
“We can also confirm that the account did not have two-factor authentication enabled at the time the account was compromised,” said X in the post.
“The SEC’s @SECGov X/Twitter account has been compromised. The unauthorized tweet regarding bitcoin ETFs was not made by the SEC or its staff,” an SEC spokesperson told CNBC on Tuesday afternoon.
The false social media post said the regulator had approved bitcoin ETFs for trading, which was denied by SEC Chair Gary Gensler.
The market anticipates the regulator to greenlight the bitcoin ETF. The SEC is expected to make a decision on it this week after opposing the idea for years.
Gensler has gone after crypto during his tenure, with the SEC taking legal action against exchanges such as Coinbase, Binance and Kraken, as well as blockchain-based payments firm Ripple, accusing each of selling unregistered securities.
– CNBC’s Jesse Pound contributed to this report.
Correction: This article has been updated to accurately characterize Ripple as a blockchain-based payments firm. An earlier version of the story mischaracterized it.
U.S. stock indexes were edging higher on Wednesday with technology stocks looking to extend gains ahead of the December inflation report, which is expected to shed more direct light on when the Federal Reserve could dial back its two-year-long effort to tighten monetary policy and cool the economy.
The Dow Jones Industrial Average DJIA
was up 38 points, or 0.1%, to 37,562
The Nasdaq Composite COMP
gained 43 points, or 0.3%, to 14,901.
On Tuesday, the Dow industrials fell 0.4%, to 37,525, while the S&P 500 declined 0.2%, to 4,757, and the Nasdaq Composite gained less than 0.1%, to 14,858.
What’s driving markets
Inflation and its impact on bond markets and the Federal Reserve’s monetary-policy trajectory are the primary focus for markets this week as investors remain on hold ahead of Thursday’s December inflation reading and high-profile corporate earnings reports on Friday, when some of the big banks will kick off the fourth-quarter 2023 earnings season.
The S&P 500 sits less than 0.7% shy of its record high of 4796.6 touched a little over two years ago, after rallying strongly in the last few months primarily on hopes that easing inflation will allow the Fed to lower interest rates sooner and faster than the markets previously anticipated.
The yield on the 10-year Treasury BX:TMUBMUSD10Y,
the benchmark for borrowing costs, has fallen from 5% in October to 4.014% on Wednesday.
But for this bullish narrative to play out, inflation must be seen continuing to fall back to the central bank’s 2% target. That’s why great importance is therefore being placed on the consumer-price index for December, which will be published at 8:30 a.m. Eastern on Thursday.
Economists forecast that annual headline CPI inflation inched up to 3.2% last month from 3.1% in November. The core reading, which strips out more volatile items like food and energy, is expected to fall from 4% to 3.8%.
Adam Phillips, director of portfolio strategy at EP Wealth Advisors, said the CPI report may give investors enough confidence that the disinflation is likely to continue, even if the price levels are “still a very long way from anything that is considered healthy.”
However, he cautioned that the economy has “certain factors” that are beyond the Fed’s control, such as the volatility in supply chains and growing geopolitical risks, as well as a potential resurgence in inflation, he told MarketWatch via phone on Wednesday.
“[E]quities have remained broadly range-bound since just before Christmas, with little to push them in either direction,” said Jim Reid, strategist at Deutsche Bank.
“That might change soon, since we’ve got the U.S. CPI print tomorrow, and then the start of earnings season on Friday, but for now at least, there’s been few headlines for investors to latch onto, just a bit of indigestion after over exuberance before New Year left markets with a little bit of an extended hangover,” Reid added.
In U.S. economic data, the wholesale inventories declined 0.2% in November, in line with Wall Street expectations, as manufacturers continue to juggle with a fragile economy, according to the Commerce Department.
New York Fed President John Williams will speak in White Plains, N.Y., at 3:15 p.m. Eastern time.
Companies in focus
Shares of Boeing Co. BA, +1.53%
edged up 1.5% on Wednesday after chief executive David Calhoun on Tuesday told employees the jet maker needed to acknowledge its mistakes after a panel blew off a 737 Max 9 jet flown by Alaska Airlines days earlier, and approach the matter with “complete transparency.” Shares have fallen nearly 8% this week.
Two centuries ago one of the first economists, David Ricardo coined the still famous investment adage “Let your profits run (on).” Makes sense. All else equal, one would prefer to own or buy stocks in uptrends, and there have been some exceptional uptrends this year. Thirty-six Russell 1000 stocks are up more than 100%. What would Ricardo have done with his winners if he had options to trade? Here’s my take. Let ’em ride: Several of 2023’s best-performing stocks were grossly undervalued at the beginning of the year. In some cases for reasons that were easily identifiable both then and now. Arguably the best example is Meta . At its November 2022 low Meta traded down to $90 a share, less than 7 times the $13.71 in adjusted eps the company earned in FY2021. Although revenue growth paused in 2022 the company had a very strong balance sheet and had historically been a free cash flow generating powerhouse. The problem was that Mark Zuckerberg was losing billions, throwing money at his vision for the metaverse, and investors were concerned it had become an obsession taking precedence over the best course for the business. Many investors were quite vocal about their displeasure, but voicing their concerns was all they could do because Zuckerberg controls more than 50% of the voting rights through a special class of shares. So while investors recognized the company could deliver massive earnings and free cash flow, they were afraid Zuckerberg had gone off the reservation. Eventually, though he did elect to moderate his spending on his ambitious visions. The company has returned to record profitability and free cash flow generation and the stock has responded in kind, up 140% since the November 2022 low. While certainly not as cheap as it was a year ago, Meta remains cheap at not because it is trading at 20 times FY2024 EPS estimates of $18 a share, but because that represents 20% annual EPS growth. The stock sports topline growth, substantial margins, a strong balance sheet, substantial free cash flow, and a moat around its business. META’s biggest threat is itself, and as long as management doesn’t go back down the rabbit hole, it is a poster child for growth at a reasonable price (GARP). Other big winners for 2023 that remain well positioned for 2024 as long-term rates have dropped while unemployment has remained low include Vertiv Holding , Builders Firstsource , Topbuild Corp , and PulteHome . Nvidia and Uber are too, even despite the huge runs they’ve had at reasonable valuation given their respective growth rates, but bear in mind that some investors may have deferred taking gains in these and other large winners for tax reasons. Due to this and their high betas, any market choppiness in the market generally will affect these names more severely. It’s time to hedge some of those gains (or take profits): The second best-performing stock in the Russell 1000 for 2023 is Coinbase (COIN) . As of year-end 2022, COIN was down more than 90% from its November 2021 peak. Investors shunned the stock as cryptocurrencies had plummeted. Bitcoin, the most well-known cryptocurrency, had fallen more than 76% from peak to trough, and it would be reasonable to assume that if cryptocurrencies continued to perform badly, speculators would trade them less often which would hurt the business of a crypto exchange. It did. Revenues fell nearly 60% year-over-year between FY2021 and FY2022. The company, which had made $21 in adjusted EPS in 2021, swung to a $6.63 a share loss. Unsurprisingly, as cryptocurrencies rebounded in 2023, so did COIN. What’s surprising though is the degree to which it rebounded. Where bitcoin rose > 150%, COIN is up over 400%. Some businesses are indeed highly leveraged to prices for other goods or assets. Gold miners’ prices are levered to the price of gold, oil companies to the price of oil, chip makers like MU to the price of NAND and DRAM and cryptocurrency miners and exchanges to the prices of the cryptocurrency. The issue I have with Coinbase is that despite the sharp increase in cryptocurrency prices, revenues and earnings have not rebounded in quite the same way. FY2024 revenue expectations of 2.9 billion are more than 60% below the company’s zenith in 2021 of $7.8 billion. The company is expected to report FY2023 losses of 89 cents share. Street estimates are not forecasting a return to profitability until 2027. Why not? How is it that cryptocurrency prices can rebound so sharply and the company cannot return to the same level of profitability they saw in 2020 when the price of bitcoin for example was far lower than it is today? If I believed that Coinbase could reliably generate $4.7 billion in net income as it did in 2021 this thing would be ludicrously cheap, but it feels as if the landscape is shifting beneath the company’s feet. Other companies I place in this category include Roku and SoFi . The single best-performing stock in the Russell 1000 for 2023 is Affirm , up nearly 420% year-to-date. Affirm Holdings is a popular buy now, pay later fintech company. How popular? It’s growing topline at greater than 20%. Its popularity is understandable. In some cases, it offers purchases at zero interest, considerably more attractive than using a high-interest credit card. Additionally, these loans aren’t currently reported to TransUnion or Equifax, so the impact of taking the loan on the borrower’s credit score may be reduced, and in any case, borrowers may wish to preserve available credit lines for other uses. Likely, the company’s partnerships with big online outlets such as Amazon and Walmart are going to show substantial gains during this holiday shopping season. The market opportunity is also substantial relative to the company’s size. At $15 billion in market capitalization, Affirm is still tiny. To put things in perspective, the combined market capitalization of Visa and Mastercard is nearly $1 trillion. Paypal is nearly $70 billion. The problem here is that the idea of buy-now-pay-later isn’t proprietary. Affirm is likely to face competition from other payment players. Charge-offs remain low, but we know that consumer credit balances have been rising steadily and are now at all-time highs. Auto loan delinquencies have also been rising. If the other large credit agencies TransUnion or Equifax eventually join Experian and begin tracking these loans, that would eliminate a perceived benefit by consumers. Ultimately though it comes down to a question of whether I would prefer to own money-losing Affirm based on their topline growth, or profitable Paypal for 1/10th the multiple betting they’ll catch on to the portions of Affirm’s business that are growing. If you own, but don’t want to sell, consider purchasing the March $45/$35 put spread as a particle hedge, as illustrated below. The answer is simple, I’d much rather own PayPal (or the major credit card companies). Other names I place in this category include Palantir Technologies . Here too is a company that is growing, but it’s unclear whether the growth targets may be a bit ambitious. Palantir relies heavily on government contracts, greater than 56% by revenue. Government business can be great, but it does introduce concentration risk as that segment of their revenue share indicates. One final thing: hedge when you can, not when you have to. As I write this the VIX Index closed at 12.45, only narrowly higher than the 12.07 low for the year on December 12th while the S & P 500 is just slightly below its record high set on January 3, 2022. DISCLOSURES: THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
A flag outside the U.S. Securities and Exchange Commission headquarters in Washington, Feb. 23, 2022.
Al Drago | Bloomberg | Getty Images
Regulators around the world from Europe to Asia ramped up efforts to bring about formal laws for digital currencies in 2023 — but it was the U.S. that took some of the harshest legal actions against major players in the industry.
In a year that saw crypto heavyweight Binance ordered to pay more than $4 billion to U.S. authorities and its former CEO’s guilty plea, along with high-profile lawsuits against five crypto companies by the Securities and Exchange Commission, regulators overseas have been equally busy both adopting new legislation — and pushing for more — to rein in the sector’s bad actors.
Here’s the state of play globally for crypto regulation and enforcement in 2023 — and a look at what to expect in 2024.
The U.S. has proven to be one of the most active enforcers of penalties and legal action against crypto companies this year, as authorities looked to counter bad practices in the industry following the collapse of Sam Bankman-Fried’s crypto empire — including his FTX exchange and sister firm Alameda Research.
“To be clear, in some cases — like FTX — enforcement was necessary,” said Renato Mariotti, a former prosecutor in the U.S. Justice Department’s Securities and Commodities Fraud Section. “But U.S. enforcement actions against market participants that are more focused on compliance are questionable and the result of the U.S. ‘regulation by enforcement’ approach.”
While many regions have passed laws with potentially tough penalties, the U.S. is still the only country that has actively taken action against large-scale crypto companies and projects. Thus far, the U.S. has led that campaign against crypto firms by enforcement and has, by far, been the most punishing of regulators when it comes to penalties and fines.
“Other countries have a comprehensive regulatory framework in place. We don’t,” Mariotti told CNBC. “As a result, issues that should be determined by legislation or regulation are instead litigated.”
Indeed, in the absence of hard-and-fast rules from Capitol Hill, the SEC, the Commodity Futures Trading Commission, the Department of Justice, and Treasury’s Financial Crimes Enforcement Network (FinCen), have worked in parallel to police the space, in a sort of patch-quilt version of regulation-by-enforcement.
Richard Levin, a partner at Nelson Mullins Riley & Scarborough who has represented clients before the SEC, CFTC, and Congress, tells CNBC that these agencies have been some of the most active enforcers around the world concerning the regulation of digital assets and cryptocurrencies.
“These agencies have provided guidance to the industry on how digital assets and cryptocurrencies must be offered and sold, traded, and held by custodians,” said Levin, who has been involved in the fintech sector for 30 years.
“However, much of their work has involved providing guidance to the industry through enforcement actions,” continued Levin.
Since 2019, Justice’s Market Integrity and Major Frauds Unit has charged cryptocurrency fraud cases involving over $2 billion in intended financial losses to investors worldwide.
In its annual report summing up enforcement actions, the CFTC noted that nearly half of all cases in 2023 involved conduct related to digital asset commodities. Meanwhile, the SEC highlighted that 2023 was notable for its enforcement of “crypto-related misconduct, including fraud schemes, unregistered crypto assets and platforms, and illegal celebrity touting.” Since 2014, the SEC has brought more than 200 actions related to crypto asset and cyber enforcement.
The most stringent cases played out in the first half of the year when the SEC accused Binance and Coinbase of engaging in illegal securities dealing in a pair of lawsuits.
Most notably, the SEC alleges that at least 13 crypto assets available to Coinbase customers — including Solana’s sol, Cardano’s ada, and Protocol Labs’ filecoin — should be considered securities, meaning they’d need to be subject to strict transparency and disclosure requirements.
In Binance’s case, the SEC went a step further. In addition to securities law violations, the company and its co-founder and CEO Changpeng Zhao were also accused of commingling customer assets with company funds.
Concerning criminal enforcement, Damian Williams, the U.S. attorney for the Southern District of New York, has been leading some of Justice’s highest-profile crypto prosecutions, including the monthlong trial of Bankman-Fried, the disgraced FTX founder. In November, a jury found the former FTX chief executive guilty of all seven criminal counts against him following a few hours of deliberation.
But crypto companies have begun to push back, with some threatening to decamp from the U.S. entirely should this dynamic of policing by enforcement continue.
Coinbase CEO Brian Armstrong condemned the SEC’s actions against the exchange and suggested the company may be forced to move its headquarters overseas. Armstrong later walked back the threat of relocating abroad, but Coinbase and other major crypto firms have still begun to invest more heavily in their international operations.
Crypto market participants nevertheless hope that the spate of legal challenges brought to crypto companies in 2023 will bring clarity in the form of new regulations.
“Clearer regulatory frameworks and stance from regulators globally have provided a sense of legitimacy and security, encouraging more widespread participation in the bitcoin market,” Alyse Killeen, managing partner of Stillmark Capital, told CNBC.
The crypto industry saw the most legislative progress on crypto laws in the U.S. this year, with one of the competing digital asset bills making it past multiple House committees for the first time.
Even as U.S. lawmakers take steps toward crypto legislation, there remains no law in the U.S. tailored specifically for the industry. Nelson Mullins Riley & Scarborough’s Levin tells CNBC it’s unlikely that we’ll see much progress in a presidential election year and with a divided federal government.
He argues that even without rules on crypto from lawmakers, routine complaints that U.S. regulators are not providing guidance to the industry are without merit.
According to Levin, “The SEC, the CFTC and FinCEN routinely provide informal guidance on the regulation of digital assets and cryptocurrencies.”
“The SEC even went so far as to provide a framework for the analysis of digital assets and cryptocurrencies. The SEC also created a fake digital asset (Hosey Coin) that gave advice to the FinTech community on how not to launch a digital asset,” Levin added.
“Some members of the industry forget the SEC is relying on laws that were written when American football players wore leather helmets, and the SEC must apply those laws to the FinTech industry,” he said.
Despite crypto’s recent fading buzz, Killeen of Stillmark Capital doesn’t expect regulators to become fatigued by crypto in 2024. In the same time year that two of crypto’s leading figures were sent to jail, shares of Coinbase — and prices of digital currencies like bitcoin and ether — have rallied sharply.
Since the start of this year, Coinbase’s stock price has surged more than 400%. Bitcoin and ether, meanwhile, have both roughly doubled in price. That’s as investors anticipate that approval for a bitcoin exchange-traded fund by the SEC may be around the corner.
The European Union looks set to apply its Markets in Crypto-Assets legislation, which is aimed at taming the “Wild West” of the crypto industry, in full force starting next year.
The law, initially proposed in 2019 as a response to Meta’s digital currency project Diem, formerly known as Libra, aimed to clean up fraud, money laundering and other illicit financing in the crypto space, and stamp out the sector’s bad actors more broadly.
Read more about tech and crypto from CNBC Pro
It also sought to tackle a perceived threat from so-called stablecoins, or blockchain-based tokens that serve as a representation of government money but are backed by private companies. Stablecoins are effectively digital currencies that are pegged to the value of fiat currencies like the dollar.
While tether and Circle’s USDC aren’t perceived as “systemic” assets capable of disrupting financial stability, a private stablecoin from a massive company like Meta, Visa or Mastercard could pose a bigger threat and potentially undermine sovereign currencies, in several EU central bankers’ eyes.
The U.S.’s dominant role in global finance and its focus on consumer protection plays a crucial role in its leading position in crypto regulation enforcement. However, the landscape is evolving, and other jurisdictions are steadily enhancing their regulatory and enforcement frameworks in crypto.
Braden Perry
Former federal enforcement attorney and current partner at
Part of the EU’s framework for crypto is aimed at tackling threats — particularly that of the euro being undermined — by making it impossible for issuers to mint stablecoins backed by currencies other than the euro, like the U.S. dollar, once they meet the threshold of more than 1 million transactions per day.
Meanwhile, the European Union is moving towards a unified regulatory framework for cryptocurrencies with its Markets in Crypto-Assets Regulation (MiCA).
This year, the three main political institutions of the EU-approved MiCA, paving the way for the regulation to become law. MiCA came into force in June 2023, but it’s not expected to apply fully until December 2024.
Companies are already getting ready to take advantage of the new rules, with Coinbase submitting an application for a universal MiCA license in Ireland. If and when it is approved, this would allow Coinbase to “passport” its services into other countries like Germany, France, Italy, and the Netherlands.
Braden Perry, former federal enforcement attorney and current partner at law firm Kennyhertz Perry, said that while the U.S. remains a top enforcer for the crypto industry, its perception as a regulator “may be diminishing,” as other jurisdictions have stepped in with clearer rules.
“This perception stems from the proactive measures taken by U.S. regulatory bodies like the SEC, CFTC, and IRS, especially in addressing fraud and security issues in the crypto market. High-profile legal actions in the U.S. further cement its image as a strict enforcer,” he said.
“However, other regions, including Singapore, Dubai, Hong Kong, and the European Union, are also developing robust regulatory frameworks,” Perry added. “While these regions may not be as visible in international media for enforcement actions, they possess significant and sometimes stringent regulatory mechanisms.”
But while the broader EU has been racing to implement new crypto laws, individual European countries haven’t been resting on their laurels.
France has been tempting crypto companies and traders alike to its shores with the promise of tax cuts on crypto profits and a smoother registration process for digital asset firms.
Starting from Jan 1, 2024, France’s Financial Markets Authority, or AMF, is set to amend its registration requirements for crypto firms to better align with MiCA, according to an August statement from the regulator.
At the same time, French authorities have kept a skeptical eye on fraudulent activity among various crypto players. In September, French regulators added 22 fraudulent websites — including some that market trading in crypto and crypto-linked derivatives — to a blacklist of unauthorized foreign exchange providers.
In Germany, meanwhile, the financial regulator Bafin has said it wants to accelerate its approach to licensing crypto custody services, as part of a broader effort to instill trust and transparency in the crypto market.
The U.K., a non-member of the EU, passed a law in June that gives regulators the ability to oversee stablecoins. But there are no concrete rules for crypto just yet.
The U.K.’s Treasury department released its response to a consultation on new crypto rules earlier this year, confirming that it plans to bring a range of crypto activities, including crypto custody and lending, within existing laws governing financial services firms in the country.
Earlier this year, the Monetary Authority of Singapore, which is recognized for clear fintech and crypto regulations that do not rely heavily on enforcement actions, finalized rules for stablecoins, making it one of the world’s first jurisdictions to do so.
Singapore was notably bruised by the collapse of TerraUSD, a controversial algorithmic stablecoin, in 2022, as well as the fall of Three Arrows Capital, or 3AC. Both Terra Labs, the company behind Terra, and 3AC were headquartered in Singapore.
Singapore’s new framework requires stablecoin issuers to back them with low-risk and highly-liquid assets, which must equal or exceed the value of tokens in circulation at all times, return the par value of the digital currency to holders within five business days of a redemption request, and disclose audit results of reserves to users.
The region has been increasingly warming to crypto assets, despite a broader anti-crypto push from China, which banned bitcoin trading and mining in 2021.
The Hong Kong Securities and Futures Commission, or SFC, launched a registration regime for digital asset businesses earlier this year, with clear regulations for crypto exchanges and funds.
So far, only two firms, OSL Digital and Hash Blockchain, have been handed licenses.
The United Arab Emirates has emerged as a popular base for the fintech sector more broadly, given its lack of personal income tax, flexible visa policies, and competitive incentives for international businesses and workers.
In 2022, in a bid to lead the virtual assets sector in the Middle East and Africa, Dubai — the UAE’s most populous city — launched VARA, or the Virtual Asset Regulatory Authority.
“Dubai and the UAE have created favorable conditions for cryptocurrency businesses, offering specific zones and guidelines for crypto trading,” said Perry.
Blockchain analytics firm Chainalysis notes that regulators in the UAE were early to cryptocurrency, with Dubai leading the charge when it launched a blockchain strategy in 2016.
“Since then, UAE regulators have remained at the forefront of the industry,” according to a Chainalysis report.
Two years later, in 2018, Abu Dhabi Global Market created the world’s first regulatory framework for cryptocurrency to foster innovation while safeguarding consumers.
Earlier this year, the UAE passed further crypto regulations at the federal level to make it easier for regulators like VARA to police the sector and run economic-free zones.
It remains to be seen how popular such an ETF would be with retail investors, but more than 10 asset managers, including the world’s largest, BlackRock, are working to get their version of a spot bitcoin ETF approved. Industry participants predict that after these offerings become available, it won’t just be high-risk traders, but also retirement savers who will have more access to crypto as an asset class, either through their company 401(k) plan or through solo 401(k)s, if applicable, and self-directed IRAs.
“It’s a big step toward mainstream adoption of bitcoin and cryptocurrency. [Investors] will have more options available,” said Chris Kline, chief revenue officer of Bitcoin IRA, which allows retirement savers to invest in more than 60 cryptocurrencies within retirement accounts.
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Right now, interest in bitcoin is high. The cryptocurrency is up over 150% this year after a dismal 2022, and the spot bitcoin ETF race has helped push its value higher. But it remains an extremely volatile asset class with as many enemies as true believers.
Many major pension funds have earmarked dollars to crypto as an asset class in recent years. According to the 2022 CFA Institute Investor Trust Study, 94% of state and local pension plans had some crypto exposure. Fidelity Investments, the largest 401(k) plan administrator in the U.S., first added a bitcoin fund option in the fall of 2022 to allow employees who are comfortable with the risks and volatility of cryptocurrency to invest in bitcoin within their company-sponsored 401(k) plan.
Here’s what retirement savers who do see long-term potential in cryptocurrency as an asset class need to know about the potential use cases for spot bitcoin ETFs.
Many employers have been hesitant to offer crypto in a 401(k) based on 2022 guidance from the U.S. Department of Labor, according to industry experts.
With options to own crypto within retirement accounts such as 401(k)s and IRAs being limited, most people who own crypto today do so outside of retirement accounts. Many take a self-custody approach or use an exchange such as Coinbase or Gemini. Options are also available in nonretirement accounts at Fidelity and Betterment, for example.
Accordingly, retirement savers seeking to hold crypto assets in a retirement account typically need to find a self-directed provider that allows crypto investments, and that list is also limited. Once spot bitcoin ETFs are approved, however, expect more providers to allow them, and more options for retirement savers to invest in this fashion, say industry experts.
Assuming the SEC gives an affirmative nod to spot bitcoin ETFs, as expected, more companies might decide to offer it within their 401(k) lineup, said Steven T. Larsen, a certified financial planner and founder of Columbia Advisory Partners in Spokane, Washington.
The question is how many.
The Department of Labor doesn’t prohibit crypto in company retirement plans, but in its March 2022 guidance, “it put a pretty heavy thumb on the scale for plan sponsors considering it,” said Joshua Rubin, vice president of legal at Betterment.
“At this early stage in the history of cryptocurrencies, the Department has serious concerns about the prudence of a fiduciary’s decision to expose a 401(k) plan’s participants to direct investments in cryptocurrencies, or other products whose value is tied to cryptocurrencies,” the Department of Labor wrote in a compliance assistance release.
A spot bitcoin ETF may solve some of the hesitancies the DOL outlined, including concerns related to custody and recordkeeping and valuation, Rubin said. Still, employers may be hesitant to jump on board, at least initially, some industry watchers said.
“Employers will be very reticent about being the first ones out there to allow this,” said Tim Picciott, a CFP with Lexington, Massachusetts-based Innovative Advisory Group. “I don’t see most HR departments and plan trustees just signing on. I think it’s going to have to be a move from the workers” asking for it, he said.
While market-leading custodians such as Schwab and Fidelity don’t allow investors to invest directly in cryptocurrencies within individual retirement accounts, they have become more involved in the crypto market on multiple fronts, from venture investments both financial services giants made in a crypto trading infrastructure company to a thematic crypto fund launched by Schwab.
But to invest directly, retirement investors need to work with other providers such as Bitcoin IRA, BitIRA and iTrustCapital.
However, market watchers predict more mainstream custodians will offer spot bitcoin ETFs once they become available. “It will be everywhere once these come out,” said Larsen, who is also the founder of Defi Steward, which helps investment advisors manage digital assets for clients. “This is great for people who want exposure to bitcoin as an asset class,” he said.
There are a lot of factors that go into whether bitcoin has a place in your retirement portfolio. First and foremost, bitcoin is extremely volatile and many investors don’t have the risk appetite to invest even a portion of their retirement dollars in this emerging asset class. Investors also need to consider whether they want to hold bitcoin directly in a self-directed IRA, or solo 401(k), if applicable, or invest in bitcoin through an ETF.
With a spot bitcoin ETF, having a professional manager who is going to be diversifying access to crypto could lessen — though not eliminate — risk, said Mark Parthemer, chief wealth strategist at Glenmede, a wealth management firm.
On the other hand, there can be advantages to owning bitcoin directly through a self-directed IRA, Kline said. For instance, when it comes time to take your withdrawals after age 59½, you may be able to receive your distribution as the crypto asset itself, instead of taking the cash. When you sell the spot bitcoin ETF, the redemption would likely be for cash, he said. It’s an approach the SEC regards as safer.
In either case, there can be tax advantages for long-term investors who invest in crypto through a retirement account versus a brokerage account, Parthemer said. Assuming the investment increases dramatically, a retirement account allows investors to avoid the tax at the time of sale. If it’s in a Roth IRA and you meet the holdings requirements, the withdrawals aren’t subject to tax. By contrast, if you held it in a regular brokerage account and sold it, you could be subject to capital gains taxes at the time of sale, Parthemer said.
If your employer won’t offer a spot bitcoin ETF in its 401(k) plan, you could always ask your employer to reconsider. If the answer is no, you can still open an IRA with a provider that makes spot bitcoin ETFs available.
The new spot bitcoin ETFs will be eligible for use in all types of IRA accounts — deductible, nondeductible, Roth and SEP, as well as solo 401(k) plans, said Ric Edelman, founder of Edelman Financial Services, in an email.
“Given the outsized returns that many people expect these ETFs to produce over time, buying them inside an IRA account is going to be a common recommendation by financial advisors,” said Edelman, who wrote the 2022 book, “The Truth About Crypto” to educate advisors on the asset class and has described it as a once-in-a-generation wealth opportunity.
There are applications for an Ether ETF, but that’s likely to be approved by the SEC at a later point, Larsen said. “The spot bitcoin ETF will be the test case.”
Single-stock ETFs were first introduced in Europe in 2018. There are now nearly four dozen single-stock ETFs in the U.S., many of which track the so-called “Magnificent Seven” stocks — Apple, Microsoft, Alphabet, Nvidia, Amazon, Tesla and Meta. Other names on Morningstar’s list of single-stock ETFs include Coinbase and Alibaba.
Collectively, single-stock ETFs have about $3.3 billion of net assets, according to Morningstar.
The growth of these single-stock ETFs, which are leveraged, is not particularly surprising, given that the Nasdaq is up more than 40% this year and big-tech stocks in particular are soaring. But they’ve likely earned a long-term spot in the market.
Single-stock ETFs “are here to stay,” said Bryan Armour, director of passive strategies research for North America at Morningstar. The strategy “taps into some of the gambling mindset that exists in markets,” he said.
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Here’s what investors need to know about the growth of the single-stock ETF market and where it could be heading.
There are 45 single-stock ETFs in total, according to Morningstar, from a handful of providers including Direxion, AXS, GraniteShares and YieldMax. These ETFs follow bull, bear or option income strategies.
The largest by asset size is the Direxion Daily TSLA Bull 1.5X Shares, which tracks Tesla. In July, it became the first of its kind in the U.S. to surpass the $1 billion asset mark.
The second-largest single-stock ETF by asset size is the YieldMax TSLA Option Income Strategy ETF, which had around $841 million of assets at the end of November, according to Morningstar.
In third place by asset size is the GraniteShares 1.5x Long NVDA Daily ETF, which tracks Nvidia and has soared in a year dominated by artificial intelligence optimism and the gains for chipmakers. It had about $245 million in assets at the end of November, Morningstar data shows.
To achieve their stated returns, leveraged and inverse ETPs often use a range of investment strategies. This can include swaps, futures and other derivatives as well as long or short positions, according to a FINRA explainer.
Rich Lee, head of program and ETF trading at Robert W. Baird & Co., expects to see more single-stock ETFs with an options overlay strategy and income component. YieldMax offers several of these ETFs that seek to generate monthly income by selling/writing call options on single company stock exposures.
There is continuous appetite for single-stock ETFs, and there will continue to be innovation, combining themes and exposures under the ETF wrapper, Lee said. “It’s a way to get quick exposure with leverage.”
While the number and assets within these ETFs has mushroomed, there have been duds. Single-stock ETFs tracking Nike and Pfizer — the former whose shares are close to flat this year and the latter whose shares are down 45% — among a few others, closed down. Some stocks are too bland to get investors riled up one way or another, Armour said. If an ETF can’t get enough traction, investment managers have to decide where to focus their resources, he said. It’s something for investors to keep in mind: What’s on the market today may not be in a few months.
Performance is all over the map. The Direxion Daily TSLA Bull 1.5X, for instance, had a total one-year return of about 12% through November, but it’s up about 148% year to date through Dec. 15, according to Morningstar. The GraniteShares 1.5x Long COIN Daily ETF, which tracks Coinbase, had a one-year return through November of about 206% and returned about 488% year to date through Dec. 15, according to Morningstar.
Not surprisingly, single-stock ETFs that take a bear strategy have seen negative returns of late.
But performance over time isn’t really the point.
The market for these vehicles is mostly traders and individual investors with an extremely high risk tolerance. There are other ways to gain leverage, without needing to pay fees in the 1% range, but for some more sophisticated retail investors who don’t have experience with leverage, a single-stock ETF can be a safer option, Armour said. “It’s just not a smart long-term strategy. It’s a very costly way to gamble in the stock market.”
These vehicles are appropriate for sophisticated retail investors and professionals that are willing to take a short-term view and are willing to monitor their positions daily, said Ed Egilinsky, head of sales and distribution and alternatives at Direxion.
“These are not buy-and-hold products,” he said. “If someone is looking to buy something and not pay attention to it, this is not the vehicle.”
The U.S. Securities and Exchange Commission issued an investor warning in August, reiterating the extra risks inherent to single-stock ETFs. “Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself,” the SEC said.
“You definitely have to understand what investing or hedging investment you’re trying to achieve with these products,” Lee said. “For a lot of these leveraged products, people are using it to get intraday exposure or use it for some sort of hedging.”
Which stocks could be targeted for the next hotly traded single-stock ETF?
Success is determined in part by assets, daily volume and scale, said Egilinsky. While he declined to be specific about where Direxion is next looking to add to its single-stock ETF lineup, he did say AI is a hot area. “We’re going to let this play out over time. It’s still in its infancy stages and we’ll continue to look for single stocks that make sense for us to bring to the market.”
Check out the companies making headlines before the bell: Coinbase — Crypto-related assets surged after Bitcoin topped $40,000 for the first time this year. Coinbase jumped 7%, MicroStrategy gained 7% and Marathon Digital climbed 13%. Uber Technologies — The ride-hailing stock rose 4% after S & P Dow Jones Indices on Friday said it will enter the S & P 500, along with Jabil and Builders FirstSource . The three will replace Sealed Air , Alaska Air Group and SolarEdge Technologies . Shares of Jabil and Builders FirstSource were each higher by more than 2%. General Motors — Shares of the Cadillac and Chevrolet maker added 1.3% after an upgrade from Mizuho Securities, which said GM has bottomed and is poised for growth, particularly after the labor settlement with the United Auto Workers. Spotify Technology — Spotify rose more than 1% before the bell after the music streamer said it’s laying off 17% of its workforce as it looks to trim costs amid slower growth. The cuts total about 1,500 jobs, according to a CNBC source familiar with the matter. Spotify was 129% higher for the year as of Friday’s close. Alaska Air Group — The Seattle-based carrier slid 12% after agreeing to acquire Hawaiian Airlines for $1.9 billion. Alaska Air, which would pay $18 a share, would take on $900 million in debt as part of the deal. Hawaiian Holdings, Hawaiian Air’s parent, soared 182%. Alaska Air is also coming out of the S & P 500 index. Lululemon Athletica — Shares slipped 2.1% after Wells Fargo downgraded the athleisure company to equal weight from overweight. The bank said Lululemon’s positive catalysts have already played out, and forecasts more muted growth in 2024. Carvana — Shares jumped more than 5% after JPMorgan upgraded Carvana to neutral from underweight. The Wall Street firm said the online car retailer has bolstered productivity and made progress cutting costs. — CNBC’s Michelle Fox, Hakyung Kim, Pia Singh and Samantha Subin contributed reporting
Bitcoin rallied to start the week, touched a new 2023 high to end it and suffered a brief drop in between, weighed down by the trouble at Binance. Bitcoin ended the week higher by about 4% after touching a new 2023 high on Friday above $38,000. Meanwhile, ether advanced 8%. Coin Metrics measures a week in crypto, which trades 24 hours a day, from 4:00 p.m. ET on a given Friday to the same time the following Friday. There was an array of events driving the price this week – from the election in Argentina , the minutes of the latest Fed meeting and updates to bitcoin ETF applications, to the Binance settlement and the leadership coup at OpenAI . These things not only highlighted the nuance in bitcoin’s purpose and identity, it also put the crypto industry’s long-standing regulatory woes back in focus for investors. “The thing I’d be focused on over the short term is what kind of news we have on the regulatory front versus what is already discounted by traders,” Zach Pandl, managing director of research at Grayscale Investments, told CNBC. “Are we going to see news that’s positive enough that gives us new price highs given the way people are already positioned?” BTC.CM= 1Y mountain Bitcoin, 1 year For the year, bitcoin is up about 130% even after remaining stuck in a tight range for most of it. Optimism about the likely approval of a spot bitcoin ETF has been building for the past couple months, serving as the biggest catalyst for the cryptocurrency. Pandl (whose company is a key player in the push to get an ETF off the ground with its popular GBTC product) said he thinks the market will continue to get good news on the ETF front. Moreover, as the industry recovers from the black eye FTX dealt it this time last year, regulators are learning how to separate different market participants. “Regulators are very clearly segregating a variety of issues – on one hand, bad actors and parts of the business [of crypto] that we don’t want to see continue, versus the asset management community [and] ETF community, which is just providing a product to the public,” he said. The challenge is that active crypto trader positioning appears long, he added, based on activity in crypto futures, options, open interest and funding rates. “While we may hear more positive news about the prospect of an ETF approval, some of that is priced in so things need to happen sooner or more smoothly for them to incrementally move a price,” he said. Meanwhile, Michael Rinko, a research analyst at Delphi Digital, said this week’s Binance settlement is one piece of evidence of a new narrative forming in crypto regulation, one in which the Biden administration could be starting to view crypto through a similar lens to which they see technology fields like artificial intelligence and semiconductors. It may be a long while before crypto reaches the level of priority as AI, he added, but the latest Binance development is part of an emerging narrative. “Increasingly, the view in from the U.S. government’s perspective is that they’re viewing more and more technology through the lens of national security,” he said. Rinko highlighted examples such as semiconductors and the CHIPS act and increasing engagement with AI leading to restrictions on some of Nvidia’s higher-end chips, and said a similar path could be coming for crypto. Already underway is a sort of regulatory attack on the crypto players the U.S. deems unacceptable, he said, adding it will likely fracture the crypto world into two spheres. “There will be the Western sphere of influence where there’s Coinbase , Kraken and exchanges that have relationships and ties to the so-called West, and then there will be Eastern exchanges that operate outside the influence and control of the U.S. and its allies and are persona non grata from a U.S. perspective,” he said.
Crypto bulls are eyeing $40,000 as bitcoin’s next level, with the recent rally sending the crypto to a new high for the year, as the market shakes off the news that Binance’s co-founder Changpeng Zhao pleaded guilty on Tuesday to criminal charges related to violating U.S. anti-money-laundering laws, and stepped down as head of the company.
The largest crypto BTCUSD on Friday rose to as high as $38,294, the loftiest level since May 2022, according to CoinDesk data. It climbed over 3% over the past 24 hours.
The most popular question on Ark Invest’s website has nothing to do with investing in the U.S., according to the firm’s CEO and Chief Investment Officer Cathie Wood.
“The No. 1 question on our website as we track these questions is: Why can’t we buy your strategies in Europe?” the tech investor told CNBC’s “ETF Edge” this week.
Wood’s firm expanded its exposure to Europe last month by acquiring the Rize ETF Limited from AssetCo.
“We found this little gem of a company inside of AssetCo, which philosophically and from a DNA point-of-view, is very much like Ark,” Wood said. “They know what’s in their portfolios. They’re very focused on the future, thematically oriented. They do have a sustainable orientation, which is absolutely essential in Europe.”
She speculates 25% of total demand for Ark’s research strategies comes from Europe.
“We’re terribly impressed with the quality of their [Rise ETF] own research and due diligence,” Wood said. “We saw it during the deal, and I think we’re going to hit the ground running if the regulators approve our strategies there. And, of course, we’d like to distribute their strategies throughout the world including the US.”
Wood’s firm has around $25 billion in assets under management, according to the firm. As of Sept. 30, FactSet reports Ark’s top five holdings are Tesla, Coinbase, UiPath, Roku and Zoom Video.
Coinbase is confident that a U.S. bitcoin exchange-traded fund will be approved by the U.S. Securities and Exchange Commission, the company’s chief legal officer, Paul Grewal, told CNBC.
“I’m quite hopeful that these [ETF] applications will be granted, if only because they should be granted under the law,” Grewal said in an interview with CNBC’s Arjun Kharpal.
The SEC was recently dealt a major court setback when a judge ruled that the regulator had no basis to deny digital asset management Grayscale’s bid to turn its huge GBTC bitcoin fund into an ETF.
The SEC last week declined to appeal that ruling by a key deadline, likely paving the way for a bitcoin-related ETF to be approved in the coming months.
“I think that the the firms that have stepped forward with robust proposals to our for these products and services are among some of the biggest blue-chips in financial services,” Grewal added.
“So that, I think, suggests that we will see progress there in short order.”
He didn’t say when that’s likely to happen, and added the caveat that any decision would ultimately be up to the SEC.
But, Grewal said, it’s likely now that the regulator will approve a bitcoin ETF soon, highlighting the regulator’s failure in court to block Grayscale from converting its GBTC bitcoin fund into an ETF.
SAN ANSELMO, CALIFORNIA – JUNE 06: In this photo illustration, the Coinbase logo is displayed on a screen on June 06, 2023 in San Anselmo, California. The Securities And Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, a broker and a clearing agency without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
Justin Sullivan | Getty Images
“I think that, after the U.S. Court of Appeals made clear that the SEC could not reject these applications on arbitrary or capricious basis, we’re going to see the commission fulfill its responsibilities. I’m quite confident of that.”
A bitcoin ETF would give investors a way to own bitcoin without having to make a direct purchase from an exchange.
That could be more appealing to retail investors looking to gain exposure to bitcoin without having to actually own the underlying asset.
Coinbase would likely benefit from any bitcoin ETF that is ultimately approved. The company, the largest crypto exchange in the United States, is a common stock held in portfolios designed to give investors exposure to crypto.
Not all is rosy in Grayscale’s bid to turn GBTC into an ETF, however.
The asset management firm’s parent company, Digital Currency Group, along with crypto exchange Gemini and DCG subsidiary Genesis, were accused in a New York Attorney General lawsuit of defrauding investors of more than $1 billion.
Still, Grewal sounded a positive note on the prospect of other bitcoin ETFs being approved — sooner rather than later.
“We think that other ETFs are going to be coming online soon enough as the SEC follows the law and is required to apply the law in a neutral way to the applications that are pending,” he said.
Bitcoin has risen about 72% in the year to date, in a comeback-by-stealth for the world’s biggest digital currency after huge declines in 2022.
There’s been greater investor demand for the token in recent months, as the market reacts to prospect of the Federal Reserve ending its campaign of persistent interest rate rises, and as anticipation builds around the upcoming bitcoin “halving” event, which will see rewards to bitcoin miners reduced by half, thereby limiting the coin’s supply.
Still, trading volumes have declined, as retail investors have become uninterested in engaging in the market in light of a lack of volatility and in response to severe wounds suffered by once-large industry players like FTX, BlockFi, and Three Arrows Capital.
FTX collapsed into bankruptcy last year after investors fled the platform en masse because of concerns over its liquidity. The company and its founder Sam Bankman-Fried are accused of defrauding investors in a multibillion-dollar scheme. Bankman-Fried is standing trial over these allegations.
Addressing the trial, Grewal said he was “quite encouraged and quite optimistic that a number of the bad actors in this space are being held to account through criminal trials and through aggressive regulatory actions.”
“We are quite excited that there are a number of developments we think that are just around the corner, or underway even as we speak, that will bring back investor and consumer interest in crypto,” Grewal added.
Cryptocurrency exchange Coinbase has chosen Ireland as its main operational and regulatory hub in the European Union, the company told CNBC in an exclusive interview.
Coinbase submitted its application for a license under the EU’s new Markets in Crypto-Assets (MiCA) regulation, which is set to come into force by December 2024, with the Central Bank of Ireland.
If and when it is approved, Coinbase will have a universal “MiCA license” in Ireland, which it can then use to “passport” its services into Germany, France, Italy, the Netherlands and other EU countries.
That makes it easier for Coinbase to launch new products in those markets without having to apply for individual licenses in each country. Coinbase says it’s confident it will be able to win this license.
The company is planning to be operational with its MiCA license from “day one,” Nana Murugesan, Coinbase’s vice president of international, told CNBC in an interview earlier this week.
MiCA is the EU’s attempt at introducing a pan-European regulatory framework for crypto companies. It seeks to introduce protections for investors buying and selling crypto assets, like bitcoin and ethereum.
The rules will allow crypto companies to use one license in one country to operate across all 27 EU member states.
The regulation imposes a number of requirements on crypto firms, particularly exchanges, including the requirement that they don’t commingle client funds with their own assets.
“As soon as MiCA was passed into law, and even before that, we’ve been considering a number of member states,” Murugesan said. “It was a long decision making process and we’ve been very impressed with the engagement from Ireland throughout.”
“It was really important for us to choose a member state that is not only a sophisticated regulator with significant experience in regulating financial services, but also recognises the importance of a globally integrated business model, the way we are structured as a company, and also the potential of this innovative new technology.”
Currently, Coinbase has an electronic money institution license and virtual asset service provider registration in Ireland; a crypto license in Germany; and national registrations in other EU member states including Italy, the Netherlands and Spain.
The company, which is headquartered in San Francisco, is one of the largest crypto trading venues globally.
The expansion move comes at a difficult time for the crypto industry. Crypto companies have been seeing their volumes decline, while fundraising has slowed, as macroeconomic conditions have gotten tougher and regulatory scrutiny has mounted.
Coinbase is banking on growth in the European Union, a continent with a total population of 450 million, and other international hubs, as it faces regulatory pressure back home — not least from the U.S. Securities and Exchange Commission, which accuses the company of operating an illegal securities venue.
Coinbase disputes the SEC’s claims, and is fighting the case. However, its aim is for there to be formal crypto legislation, rather than constant litigation in the courts.
Paul Grewal, Coinbase’s chief legal officer, said that progress has been “slower” than he’d like when it comes to achieving crypto regulation in the U.S. But he’s hopeful for more regulatory clarity in the future.
“We’re now seeing in court cases real questions being asked about the U.S. approach to crypto regulation and in particular securities regulation,” he said. “Judge after judge is asking serious questions about the SEC’s interpretation of our US securities laws and, frankly, challenging some fundamental points that the SEC has pressed on whether tokens are securities at all.”
“MiCA, on the other hand, I think offers … a more substantial and serious approach to crypto regulation in that it isn’t caught up with the jurisdictional fights the turf battles that we have the United States over whether particular transactions or securities transactions or commodities transactions. Instead, the focus is on keeping consumers and investors safe.”
As a market for crypto, digital asset usage is less prevalent than it is in the U.S. According to Chainalysis data, Central, Northern, and Western Europe is the second-biggest crypto economy in the world, behind only North America. However, Coinbase expects lots of growth in the region.
“In recent quarters, Coinbase has earned as much as 15%, or even 20%, of top line revenue from across Europe,” Grewal told CNBC’s Arjun Kharpal — the firm reported $808.3 million of sales globally in the second quarter of 2023, according to its latest earnings report.
“But for us, we’re going to approach the opportunity in a responsible, measured way, we’re going to let our customers drive our investments and drive our focus on what opportunities to pursue. It’s an exciting future.”
Coinbase has also decided to make Germany its regional “talent hub,” and will look to ramp up its hiring in that market to localize and tailor its product specifically for Germany.
“We are very grateful to Germany for all the support they have provided,” Murugesan told CNBC. “Our German operation has grown from strength to strength and more than doubled in headcount.”
Coinbase may even look to launch new products in Europe first before rolling them out in the U.S., Murugesan said.
The EU will be a “testbed” for Coinbase to think about “utilitarian” functions of crypto that people need in their daily lives, such as payments and transacting rather than trading, he told CNBC.
“With MiCA and the clarity that it offers, it allows us to innovate,” he added. “And hopefully, we’ll see some of those daily use cases roll out in EU first.”
Daniel Seifert, vice president of EMEA for Coinbase, said the company is also looking to launch integrations with other payment providers to make it easier for users to access digital tokens through Coinbase.
“There’s lots of exciting plans for the region that we’re going to see in the coming weeks and months,” Seifert said.