Speculation mounts that BlackRock bitcoin ETF will get green light
SEC has only approved funds based on the cryptocurrency’s futures, rejecting applications for ‘spot’ product
Speculation is mounting that BlackRock may be in sight of ending a decade-long embargo on spot bitcoin exchange traded products in the US.
Dozens of asset managers have applied to launch such a fund in the world’s largest investment market since the Winklevoss twins, the entrepreneurs and Olympic rowers, made the first filing in 2013, when bitcoin was trading at about $1,000.
However, the regulator, the Securities and Exchange Commission, has repeatedly rejected the applications, citing the risk of fraud and manipulation in the market for “spot” bitcoin, which takes place on unregulated exchanges. Instead, it has only been willing to approve ETFs based on bitcoin futures contracts, which are listed on the Chicago Mercantile Exchange, a regulated venue. It has even approved a two-times- leveraged futures ETF that launched on June 27.
Some believe BlackRock, the world’s largest asset manager, might succeed where others have failed.
Investors are even speculating on that outcome — the price of bitcoin has rallied 22 per cent since the filing on June 15 to a one-year high of $30,600 in expectation that a green light for BlackRock could unleash a wave of buying.
Likewise, the discount to net asset value of the $18.9bn Grayscale Bitcoin Trust (GBTC), the world’s largest crypto fund, has narrowed sharply to a nine-month low of 31.3 per cent.
Grayscale is suing the SEC for its refusal to allow it to convert GBTC into an ETF, a move that, if allowed, would presumably see the discount disappear.
Meanwhile, Invesco, WisdomTree, Bitwise and Valkyrie, which have all had applications for spot bitcoin ETF filings rejected, have now refiled in the hope that something may have changed.
“The BlackRock ETF is likely to be approved,” said Dave Weisberger, chief executive and co-founder of CoinRoutes, an algorithmic trading platform for the digital asset industry, whose pedigree in the ETF world stretches back to being one of the creators of Morgan Stanley’s Opals products — precursors of ETFs — in the 1990s.
Part of the optimism stems purely from the fact that this is BlackRock. According to Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, BlackRock has had 575 filings approved by the SEC, and only one rejection. He put the odds of approval on this occasion at 50-50.
BlackRock’s application is subtly different from those that have gone before, though, and those differences could potentially be enough to win approval.
The chief difference is that the Nasdaq exchange, where the iShares Bitcoin Trust would be listed, “is expecting to enter into a surveillance-sharing agreement with an operator of a United States-based spot trading platform for bitcoin”.
When the SEC rejected a bitcoin ETF filing by Bitwise last year it explicitly said that having a “comprehensive surveillance-sharing agreement with a regulated market of significant size” was one way for an applicant to meet its obligations to prevent fraud and manipulation in the underlying market for spot bitcoin.
This would enable information about trading, clearing and customer identification to be shared.
“If Nasdaq is able to enter into an agreement with an exchange such as Coinbase, that could theoretically clear a pathway towards approval since it would directly address the SEC’s main concern”, allowing regulators “to monitor for and pursue bad actors”, said Nate Geraci, president of the ETF Store, a financial adviser.
However, Bryan Armour, director of passive strategies research, North America, at Morningstar, felt BlackRock was only “edging closer to addressing [the SEC’s] concerns”.
While having a data-sharing and surveillance-sharing effort with a cryptocurrency exchange “is certainly better than having zero insight into the underlying market”, he argued that manipulation could still be occurring on other exchanges, which would influence the price of bitcoin.
While Coinbase, the proposed custodian for the fund, is widely expected to be the chosen exchange, Geraci suggested the recently launched EDX Markets exchange “could be the exact solution needed to get the SEC comfortable”, given it is modelled on Nasdaq and the New York Stock Exchange and backed by Fidelity Investments, Charles Schwab and Citadel Securities — if it can generate sufficient volume for the SEC to consider it as “significant size”.
Weisberger also highlighted BlackRock’s proposal to adopt a trust structure that is “virtually identical” to the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) — which are known as ETFs but are technically exchange traded products — rather than the traditional ETF structure governed by the Investment Company Act of 1940.
BlackRock “has done it cleverly by structuring it the same way that GLD and IAU are structured. If it goes to court, the SEC is effectively arguing that there is some fundamental difference between gold, which is designated as a commodity, and bitcoin, which has been designated as a commodity,” said Weisberger, who noted that several of the groups refiling applications have also adopted a trust structure.
Indeed, between the relationship with Coinbase and proposed surveillance-sharing agreement, BlackRock has “pretty much undercut all the SEC’s arguments other than ‘meh, we don’t like bitcoin’, so I think they have a very reasonable chance,” Weisberger added.
Both BlackRock and the SEC declined to comment.
The SEC earlier this month sued Coinbase alleging it violated US securities law by failing to register as a broker, national securities exchange or clearing agency.
Paul Grewal, Coinbase’s chief legal officer and general counsel said: “The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance.
The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual,”
Armour was unconvinced by the trust structure argument, but retained an open mind.
“I don’t see any reason to believe that the SEC would change their thinking on this [but] it just seems too left field that BlackRock has to know something that we do not,” he said.
BlackRock’s 575-to-1 record is “the only reason why we would expect it to be approved”, he added. “There is a reputational risk that comes with the filing. You feel that they wouldn’t do this if there wasn’t a reason.”
Why are so many newly floated companies being taken private?
Diagnosing the P2P2P phenomenon
Private equity have been taking stock market-listed companies private for many years.
But now public-to-private (P2P) deals have a special twist: many now involve companies that have recently gone public and have performed well post IPO. That is a sign of public market failure.
2023 has so far featured more take-private announcements than IPOs. According to Ernst & Young, take-privates have accounted for around 80 per cent of all private equity transactions so far this year and for the ten largest deals. This is the opposite of what you’d expect; after all, stock market indices are up in 2023 and flirting with all-time highs, and it has become more challenging for private equity funds to raise debt to fund their purchases.
And the announcements keep coming. On 15th June, Bain Capital, the private equity firm, made an all-cash bid for Swiss software management group SoftwareOne less than four years after its successful IPO. The offer has been rebuffed as too low, but that will probably not be the end of the story.
What’s particularly striking about the current vintage of take-private targets is that like SoftwareOne, many of them went public only recently. They have barely had time to mature as public companies, but the market has found their tannins unappetising.
This happens normally when a recently-IPO’d company blows up: for example, a high-tech company might float on a post-gravitational valuation of euphoria and hype. When the company misses forecasts by a country mile, the stock collapses to a fraction of its IPO price. Then a bidder comes along to buy it. The take-private is as much a mercy mission as it is an acquisition.
But that’s not the case with these recent “P2P2Ps” (private-to-public-to-private). Many of these companies went public and met expectations. Managements delivered on their promises. Investors had little cause for complaint. And yet the shares drifted down and then, like Samuel Coleridge’s Ancient Mariner, got stuck in the doldrums:
Day after day, day after day,We stuck, no breath no motion,As idle as a painted shipUpon a painted ocean
Take the example of OPDenergy, the Spanish renewable energy developer that floated in July last year. The company delivered on its targets, and yet its shares had fallen 16 per cent from IPO before infrastructure fund Antin announced a take-private this month — at a 46 per cent premium to spot (23 per cent premium to the IPO price). Never mind…..
After Hours Summary: AVAV +5.7% higher on earnings; SPR +1.7% higher on labor deal with union; JEF -1.3% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: AVAV +5.7%
Companies trading higher in after hours in reaction to news: CMRX +3.2% (names new CEO), EAR +2.7% (approves cost reduction plan, 32-42% workforce reduction; CEO to step down), IGT +2.5% (to provide its casino mgmt system to the Rio Hotel), SPR +1.7% (labor deal with union, still needs ratification), MSGE +1.7% (Director bought 322580 shares), BA +0.8% (in sympathy with SPR labor deal), HOG +0.6% (names new CFO), LMT +0.6% (selected by US Army to move on to second phase of TLS-EAB program), ODC +0.5% (acquires remaining non-controlling interest in Agromex)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: JEF -1.3% (also increases repurchase program to $250 mln)
Companies trading lower in after hours in reaction to news: ASTS -19.3% (launches 12 mln share offering), EXK -2.1% ($60 mln at-the-market offering), GPI -1.4% (SVP sold 10000 shares), GOOG -0.5% (research finds it violated its standards in ad deals, according to WSJ), LEA -0.4% (provides updates from its Seating Product Day), PRIM -0.1% (receives solar projects with combined value of $770 mln), GD -0.1% (awarded $769 mln US Army contract)
Closing Stock Market SummaryIt was a decidedly strong day for the stock market. The major indices all closed near their best levels of the session with gains ranging from 0.6% to 1.7%. The upside moves were in response to a slate of stronger-than-expected economic data this morning that helped to ease some concerns about a hard landing for the economy.
Namely, the May Durable Goods Orders, May New Home Sales, and June Consumer Confidence reports all went the market's way. As a result, today's trade had a risk-on and pro-cyclical vibe.
In the early going, buying interest was more pronounced in parts of the market that have been trailing index level gains this year. Mega caps, meanwhile, were relative underperformers, but were still trading up for the most part. By the afternoon, mega caps had caught up with the broader market, accelerating index gains.
Even Alphabet (GOOG 119.01, -0.08, -0.1%), which had been down as much as 1.8% after being downgraded to Market Perform from Outperform at Bernstein, briefly tipped into positive territory before closing with a modest loss.
The Vanguard Mega Cap Growth ETF (MGK) rose 1.5%; the Invesco S&P 500 Equal Weight ETF (RSP) rose 1.2%; and the market-cap weighted S&P 500 rose 1.2%.
Gains in their respective mega cap components propelled the information technology (+2.0%) and consumer discretionary (+2.1%) sectors to first place on the leaderboard.
The consumer discretionary sector was also boosted by outperforming homebuilder components in response to the jump in new homes sales in May. The information technology sector, meanwhile, was boosted by outperforming semiconductor components. The SPDR S&P Homebuilder ETF (XHB) rose 2.9%. The PHLX Semiconductor Index rose 3.6%.
Other top performers included the economically-sensitive materials (+1.4%) and industrials (+1.3%) sectors.
The countercyclical health care (-0.2%), utilities (+0.3%), and consumer staples (+0.3%) sectors all underperformed, closing near the bottom of the pack. The consumer staples sector was partially weighed down by a sizable loss in Dow component Walgreens Boots Alliance (WBA 28.64, -2.95, -9.3%) after its disappointing fiscal Q3 earnings report and outlook.
This morning's data fueled selling in the Treasury market. The 2-yr note yield rose two basis points to 4.76% and the 10-yr note yield rose five basis points to 3.77%.
- Nasdaq Composite: +29.5% YTD
- S&P 500: +14.0% YTD
- Russell 2000: +5.0% YTD
- S&P Midcap 400: +6.0% YTD
- Dow Jones Industrial Average: +2.4% YTD
Reviewing today's economic data:
- Total durable goods orders were up 1.7% month-over-month in May (consensus -1.0%) following an upwardly revised 1.2% increase (from 1.1%) in April. Excluding transportation, durable goods orders increased 0.6% month-over-month (consensus 0.0%) following a downwardly revised 0.6% decline (from -0.2%) in April.
- The key takeaway from the report is that nondefense capital goods orders, excluding aircraft -- a proxy for business spending -- jumped 0.7% following a 0.6% increase in April.
- The FHFA Housing Price Index rose 0.7% in April following a revised 0.5% increase in March (from 0.6%).
- The S&P Case-Shiller Home Price Index fell 1.7% in April (consensus -2.5%) following a 1.1% decrease in March.
- The Conference Board's Consumer Confidence Index jumped to 109.7 in June (consensus 103.8) from an upwardly revised 102.5 (from 102.3) in May. In the same period a year ago, the index stood at 98.4.
- The key takeaway from the report is that the uptick in consumer confidence was driven both by a pickup in views about current conditions and the outlook, the latter of which included a brighter outlook for consumers' family finances.
- New home sales surged 12.2% month-over-month in May to a seasonally adjusted annual rate of 763,000 units (consensus 665,000) from a downwardly revised 680,000 (from 683,000) in April. On a year-over-year basis, new home sales were up 20.0%.
- The key takeaway from the report is that lower sales prices helped drive new home sales, which are counted when contracts are signed, to their highest level since February 2022.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 a.m. ET: Weekly MBA Mortgage Applications Index (prior +0.5%)
- 8:30 a.m. ET: May Adv. Intl. Trade in Goods (prior -$96.8 billion), Adv. Retail Inventories (prior +0.2%), and Adv. Wholesale Inventories (prior -0.2%)
- 10:30 a.m. ET: Weekly EIA Crude Oil Inventories (prior -3.83 million barrels)
The SAE is creating a standardized version of Tesla's EV charging plug
It's another win for the charging standard.
Tesla’s North American Charging Standard (NACS) is one step closer to becoming the de-facto electric vehicle charging system in the US.
On Tuesday, SAE International, one of the automotive industry’s most important standards bodies, shared it is working to support the plug, a move that will make it easier for manufacturers to add NACS connectors to their vehicles and charging stations.
“Standardizing the NACS connector will provide certainty, expanded choice, reliability and convenience to manufacturers and suppliers and, most of all, increase access to charging for consumers,” the SAE said in a statement. According to the organization, the US Joint Office of Energy and Transportation helped bring together Tesla and the SAE. The association says it will create a standardized NACS connector on an “expedited timeframe,” all in hopes of improving the country’s charging infrastructure that much faster.
As The Verge points out, the announcement comes on the same day that ChargePoint said customers could begin ordering charging stations with NACS connectors. Starting later this year, the company will offer the port as an option on its home AC charging systems. More broadly, the last month has seen Ford, General Motors and Rivian all announce they plan to adopt NACS. In turn, that has pushed states like Texas to mandate government-funded EV charging stations feature Tesla’s connector. With the momentum behind NACS growing, holdouts like Electrify America may reconsider their stance on the connector.
Putin says Wagner paramilitaries paid billions by Russian state
Militia founder Yevgeny Prigozhin confirmed to be in Belarus after deal to end mutiny
The Russian state paid billions of dollars to the Wagner paramilitary group, president Vladimir Putin has said, as more details emerged of the deal that ended last weekend’s mutiny.
Putin admitted for the first time on Tuesday — after years of Kremlin denials — that Wagner had been “completely financed” by the state, with Rbs86bn ($1bn) in payments made from May 2022 to May 2023 and a further Rbs110bn in insurance payouts.
His comments came as Wagner’s founder Yevgeny Prigozhin was confirmed to be in Belarus by the country’s president and as the Russian defence ministry announced it was taking control of the paramilitaries’ heavy weapons.
Putin is now moving to subsume the group into the official military after Prigozhin’s abortive march on Moscow on Saturday.
In addition to the direct payments to Wagner, Putin said Concord, Prigozhin’s catering company, received a further Rbs80bn in army catering contracts.
“I hope nobody stole anything, or didn’t steal much, but we’ll sort this out,” Putin added.
Belarus president Alexander Lukashenko, who brokered the deal that ended the insurrection, said “security guarantees . . . were provided” to assure Prigozhin’s safe passage from Russia, adding that the Wagner founder “is in Belarus today”.
Lukashenko said Wagner’s fighters had returned to base camps in the occupied Luhansk region of Ukraine, days after they took control of the Russian city of Rostov and marched towards Moscow in an unprecedented test of Putin’s authority.
The developments on Tuesday came as Putin sought to reassert control after striking what even many hardline supporters of his war in Ukraine have claimed are embarrassing concessions to Wagner.
The FSB, Russia’s main security service, said it had closed its investigation into the weekend rebellion because the participants had “ceased the activities directly aimed at committing the crime”, according to state newswire Ria Novosti.
While in the immediate aftermath of the failed insurrection the Kremlin had said the charges would be dropped, they had subsequently remained in force, in an apparent bid to put pressure on Wagner to abide by the deal.
Some of Putin’s supporters have expressed disappointment at the Russian president’s about-face, choosing to let Wagner off without charges even after the paramilitaries seized a southern military headquarters and marched most of the way to Moscow, killing at least 13 Russian servicemen in the process.
The decision not to proceed with charges over the country’s first coup attempt in three decades was a significant turnaround after Putin had denounced Prigozhin for a “stab in the back”.
Dmitry Peskov, Putin’s spokesperson, said the Russian leader had decided not to prosecute Prigozhin to avoid bloodshed.
“There was a desire not to let the worst-case scenario happen,” Peskov said on Tuesday. “There were certain promises, the agreements are being realised.” Putin “always keeps his word.”
Putin spent Tuesday meeting with soldiers and security service officers, praising them for what he said was their role in stopping the uprising even as some of their commanders admitted they had done little.
At a ceremony outside the Kremlin’s ornate medieval Orthodox Christian churches, Putin said Russia’s security forces had “essentially stopped a civil war” and held a minute of silence for the pilots killed resisting paramilitary group Wagner’s advance on Saturday, saying they had “fulfilled their duty with honour.”
The men, Putin said, had “stood in the way of unrest that would have inevitably resulted in chaos.”
Wagner did not immediately confirm whether it would surrender its weapons to the Russian defence ministry, whose leaders have been the main target of Prigozhin’s ire for months as the invasion of Ukraine sputtered.
After attending Putin’s speech at the Kremlin on Tuesday, Viktor Zolotov, head of the national guard and the president’s former bodyguard, said they had discussed giving his units heavy weaponry.
Brunello Cucinelli Presents Latest Restoration Project
The Fondazione Brunello e Federica Cucinelli is aiming to contribute to restore Castelluccio di Norcia, which was damaged by the 2016 earthquake.
MILAN — Brunello Cucinelli thinks in terms of centuries.
On Tuesday, Cucinelli unveiled a project aimed at restoring the medieval village of Castelluccio di Norcia “for the next 500 years,” he said during a presentation of the scale model at the Triennale Museum in Milan. Castelluccio di Norcia was seriously damaged by the 2016 earthquake and is located in the Umbria region, a two-hour drive from Cucinelli’s Solomeo headquarters.
The project is helmed by the Fondazione Brunello e Federica Cucinelli, not by the Brunello Cucinelli publicly listed company, and the idea is to start restoring the main square and the church in the village.
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“The shape of the village and landscape that would result from construction techniques and decorative elements and consideration of the geological and botanical environment are as contemplated in the ‘Environmentalism’ criteria formulated by Gustavo Giovannoni in the 1930s,” said Cucinelli, citing the architect, urban designer and restorer who greatly contributed to the field of conservation. “The ideas, the project we intend to donate to the village of Castelluccio in the hope that it may be rebuilt has much in common with how we live and work in Solomeo, in harmony with creation and respectful of the dignity of the place.”
Cucinelli touted the village’s “extraordinary beauty, its healthy air, silence and good food, its long history and its peaceful, hardworking and dignified inhabitants. At the same time, the project is intended as a donation towards a future inspired by human sustainability, an attempt to make a significant contribution of beauty to the humanity that will animate the centuries to come.”
He declined to provide any financial details, saying he was more interested in the long-term scope of the venture rather than the economics. He also did not specify a date when works will kick off, but said “soon.”
Cucinelli was flanked by his longtime friend and collaborator, architect Massimo de Vico Fallani, and together they explained they had carefully studied archival documents and several on-site surveys in order to understand the historical significance of the urban area in relation to the surrounding landscape, which is dominated by the Monte Vettore.
The project consists of 28 panels including plans, perspective and drawings and a landscaping project. The Santa Maria Assunta church was completely wiped out except for the apse area and specialists and technicians from the Ministry of Cultural Heritage and Activities are involved in the reconstruction. Beyond the church, Cucinelli has imagined an open-air theatre as a symbolic place of culture.
Cucinelli bought Solomeo’s 14th-century castle and surroundings in 1985, and has since restored the entire village, dubbed the “Hamlet of the Spirit,” which includes not only the production factory but also a theater complex; a library; a Monument to the Dignity of Man; the Aurelian Neo-humanistic Academy, hosting seminars on philosophy, history, architecture and spirituality; a vineyard, and a school of arts and crafts that teaches masonry, gardening and farming, tailoring, knitting, cutting and sewing, darning, and mending.
Over the years he has pledged to support the restoration of Norcia’s Civic Tower dating back to 1700, the Museo della Castellina and the town’s theater, which were damaged during the tragic earthquake that hit central Italy in 2016.
That year he also said he would to support the restoration works of Norcia’s Bénédictine monastery, adjacent to the San Benedetto 13th-century basilica, which was the most damaged building with only its Gothic facade left standing.
In the past the entrepreneur invested in the preservation of the region’s other cultural assets, including donating 1 million euros to help restore the famous Etruscan Arch of Perugia, which dates to the third century B.C. In that city, located 10 miles from Solomeo, the foundation also financed the restoration of the Morlacchi Theater, dating back to 1778.
The facades of the San Lorenzo Cathedral in Perugia, in Italy’s central Umbria region, have been restored thanks to contributions from the Brunello and Federica Cucinelli Foundation.
In 2021 Cucinelli presented his next project for Solomeo — a Universal Library.
Malaria Is Contracted Within U.S. Borders for First Time in Two Decades
Health officials warn summer travel could also bring more imported cases
Five cases of malaria have been identified in the U.S., marking the first time since 2003 that the disease has been acquired within the country, federal health officials said.
Four people in Florida and one in Texas contracted the mosquito-borne disease over the past several weeks, according to a health advisory issued Monday by the Centers for Disease Control and Prevention. Those patients have received treatment and are improving, the CDC said.
Health officials in Texas and Florida are surveying for additional cases and have implemented mosquito-control measures.
The risk of acquiring malaria in the U.S. is extremely low, the CDC said. But it is higher in places where mosquitoes survive for most the year and where many travelers are coming from places where malaria is more common.
Malaria is a potentially fatal disease and should be treated as a medical emergency, health officials said.
Symptoms include fever, chills, headache, muscle pain and fatigue.
The disease is transmitted through mosquito bites.
Malaria can’t be spread person-to-erson.
Malaria spread in the U.S. through the mid-20th century.
The U.S. eliminated malaria in 1951 through a campaign of applying the insecticide DDT, improving drainage and removing mosquito-breeding sites.
Most of the 240 million cases of malaria each year occur in Africa.
Most malaria cases in the U.S. are imported by people traveling to places with higher transmission rates such as sub-Saharan Africa and South Asia.
The World Health Organization for the first time recommended a malaria vaccine in 2021 for children in sub-Saharan Africa.
The vaccine had been under development since the 1980s.
Nearly 1.5 million children at high risk of illness and death from malaria in Ghana, Kenya and Malawi have received their first dose of the vaccine, according to the WHO.
Increased international travel this summer could cause a rise in imported malaria cases, the CDC said.
About 2,000 cases of malaria were reported annually in the U.S. before the Covid-19 pandemic, according to the health agency.
Health officials in Sarasota and Manatee counties near Tampa, Fla., issued a mosquito-borne illness alert earlier this month after identifying confirmed cases of locally-acquired malaria. Texas officials said last week a person contracted malaria after spending time working outdoors in Cameron County, located near the southern border on the Gulf of Mexico.
Locally-acquired malaria last occurred in the U.S. in 2003, when eight cases were identified in Palm Beach County, Fla., according to the CDC.