Bitcoin Soars, Stocks & Yields Rise

Stocks rose modestly this morning as traders braced for a deluge of earnings from key companies. The 10-year Treasury yield rebounded, but the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all ticked up by approximately 0.5% in spite of this. The 10-year yield saw a climb to 4.86%, recovering from an earlier dip and adding another layer to its recent volatility. Just yesterday, this yield had soared past the 5% mark, hitting its highest level since 2007, before experiencing a sharp pullback.

In the earnings arena, General Motors yanked its 2023 profit guidance off the table, citing escalating costs linked to UAW strikes. On the flip side, Spotify defied expectations by posting a profit, catching the market somewhat off guard.

Shifting gears to the crypto market, Bitcoin surged nearly 10% today, reaching $34,872, its highest level in close to 18 months. This uptick comes on the heels of a 10% leap just yesterday, marking Bitcoin’s best performance in nearly a year. The bullish sentiment wasn’t confined to Bitcoin alone; it rippled across the broader crypto market and even influenced related equities.

The market is buzzing with speculation that the U.S. Securities and Exchange Commission (SEC) could soon green-light an exchange-traded fund (ETF) focused on Bitcoin. Such a move is expected to accelerate demand. “The value of … any asset, basically, is the amount of people using it,” noted Steen Jakobsen, chief investment officer at Saxo. “So the ETF would make a large audience and increase liquidity.”

The rationale is straightforward: a Bitcoin ETF would open the floodgates for investors who have been on the crypto sidelines, enabling them to gain exposure through the stock market. This could potentially channel a fresh influx of capital into the sector.

Ether, the second-largest cryptocurrency, wasn’t left out of the rally, soaring 6.82% to reach $1,825.50, its highest point since last August. Shares of crypto-linked companies like Coinbase Global and MicroStrategy also experienced a lift in after-hours trading.

BlackRock, the investment giant, is among several U.S. financial firms with Bitcoin ETF applications in the pipeline. Fueling the speculation around approval was the appearance of BlackRock’s iShares ETF on the DTCC’s website, although the reasons for its listing remain unclear.

Adding another layer to the anticipation was recent news that the SEC won’t contest a court ruling stating it was incorrect to reject an ETF application from crypto firm Grayscale Investments. “The SEC being pressured by the courts increases the probability” of an ETF getting the nod, stated Geoffrey Kendrick, Standard Chartered’s head of digital assets research.

In a separate development, Grayscale introduced five crypto sector indices in collaboration with FTSE Russell. These indices aim to track the performance of crypto assets across various categories, including currencies, smart contract platforms, financials, consumer and culture, and utilities and services.

Alternatively, it could be argued that Bitcoin was due for a bounce; it moved mostly sideways since April of this year. And, with some analysts anticipating an imminent “everything rally,” it may have only been a matter of time until Bitcoin surged, regardless of whether a new spot ETF was approved.


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