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Bitcoin

ARK Boosts Exposure to Coinbase, Partners on Bitcoin ETF


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Ethereum

China’s Love-Hate Bitcoin Drama Ends Badly


Watching the cryptocurrency game play out in China, it’s hard not to think about Charlie Brown, Lucy and the football.

Charles Schultz’s “Peanuts” cartoon says more about the herd behavior of crypto enthusiasts than meets the eye. Every time, Lucy convinces Charlie she’ll hold the ball for him to kick. Each time, she yanks it away at the last second, with Charlie landing flat on his back pondering his gullibility. Bullishness on bitcoin and its peers often seems that way.

China, of course, is Lucy here. In recent years, no country seemed more enthusiastic about crypto assets—both mining and trading—than China, where the first wave of important exchanges popped up. Time and time again, though, President Xi Jinping’s regulators have yanked away the market’s growth and potential—often quite suddenly.

Now, it seems as if Xi’s team wants to hide the ball for good. After banning mining and trading, it’s going after the fintech and retail giants that might give crypto holders the impression they could actually do something with their wealth.

The People’s Bank of China is rolling out its own digital currency in the months ahead. In the meantime, it is ordering Ant Group and four huge state-owned banks to crack down even further on transacting in privately created digital assets. When Beijing is summoning Agricultural Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Postal Savings Bank of China to sever ties with crypto assets, the market is facing a period of existential soul searching.

The what of China’s move against the crypto world is obvious. The why, less so. It’s hard not to see this as the financial empire that supports and enriches the Communist Party striking back. And reasserting itself in ways that auger poorly for the direction of reforms in Asia’s biggest economy.

The role of Ant here, by far Asia’s most watched fintech behemoth—and this goes too for the crypto crackdown—seems no coincidence. Few global chieftains have had a tougher eight months than Alibaba Group founder Jack Ma, who set the Ant juggernaut in motion.

On October 24, Ma gave what might be recorded in posterity as the costliest speech ever given. That day in Shanghai, Ma seemed to forget that in China, the boards of Alibaba and Ant don’t really answer to shareholders but to Beijing. The epic fallout from China’s most famous innovator saying aloud that China’s regulators don’t understand the internet and calling the country’s state-banking giants “pawnshops” was fast and furious.

Within days, Ant’s hotly awaited $35 billion initial public offering, to be history’s biggest, was off. That was as much a blow to Ma’s inner circle as China investors. In 2014, Ma listed Alibaba in New York. At the time, it was the biggest IPO ever and announced China’s arrival as a major tech disruptor.

In November 2020, though, Ma planned to take Ant public in Shanghai and Hong Kong, leaving Wall Street pulsating with envy. That was, until Chinese officials pulled the plug.

The conventional wisdom is that Beijing sidelined Ant to rein in financial risk—a “time out” of sorts to strengthen China’s regulatory framework. But Ant’s plans were well publicized before Ma’s speech, including the IPO prospectus.

Surely, China’s leaders knew on October 23 what Ma was planning before he said, a day later, that “today’s financial system is the legacy of the Industrial Age. We must set up a new one for the next generation and young people. We must reform the current system.”

The more likely story here is that Ma, by ruffling feathers, gave regulators the chance they’d long sought to clip his wings. And those of Ant, whose ambitions to turn China Inc. on its head became a major worry for Beijing. Many owe their power—and personal fortunes—to the state sector staying at the center of the economy.

Ant was about to disrupt things in epochal ways. Early on, fintech companies were to be middlemen between lenders and consumers, not institutions that might need to set aside capital buffers. Yet Ma’s ambitions to expand from payments to insurance to investments and other pursuits could upend China Inc. in tantalizing ways, particularly as peers follow suit.

Suddenly, there would be valid questions about where this fintech revolution leaves Agricultural Bank of China, China Construction Bank and Industrial and Commercial Bank of China. Who needs sprawling legacy banks when smaller, scrappier finance startups are springing up to modernize the mainland banking business. What if the Ant-Alibaba universe wanted to issue its own digital currency, akin to Facebook’s hopes for a “Diem” blockchain-based payment medium?

The use of private currencies that could be used to evade detection, taxation and overseas capital flows are a foundational risk to Beijing’s sense of control. As China’s Big Tech industry expands into every corner of mainland finance, it will collect reams of data—and influence—in a nation where the government is used to doing the surveillance.

This threat explains why it’s no longer just Ant in harm’s way. Dozens of Davos-attending Chinese tech billionaires have also been put on notice. This dragnet includes WeChat operator Tencent, internet search giant Baidu and myriad other household names.

Nothing threatens China’s top-down system more than cryptocurrencies which are essentially encrypted money flows. So expect Lucy–China—to continue to play with crypto asset enthusiasts for the time being. But there should be no confusion about how Beijing’s love-hate drama with bitcoin will end. Badly.



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ekrona

Bitcoin’s hash rate has fallen 50% from its peak in May


Bitcoin’s hash rate — the computing power used to mine new blocks — has dropped 50% from its peak its May.

According to The Block’s Data Dashboard, the hash rate has decreased from 180 EH/s on May 14, to its current value of 90 EH/s.

Due to this reduction, bitcoin’s hash rate is back to levels last seen in May 2020. It also significantly counters the long-term upward trend and is the largest drop in history.

As The Block has reported, the main cause for the falling hash rate is the crackdown on bitcoin mining in China. After a high-level comment was made during the China State Council meeting last month, regions across China started issuing notices for miners to cease their operations. This has led to a huge decline in China’s contribution to the hash rate.

Another impact has been the falling price of bitcoin, which has dropped from a peak price of $63,500 in April to its current price of $35,300. This has made it less profitable to mine bitcoin (although the declining hash rate will counteract that).

Falling on-chain metrics

Bitcoin’s hash rate is not the only on-chain metric in decline.

The number of daily transactions on the bitcoin network has fallen to levels not seen since July 2018. According to the dashboard, just 200,000 transactions are being made per day (on average over the last seven days).

There has also been a decline in the number of active addresses on the network, although it only returns to April 2020 levels. The number of daily active addresses has gone down from 1.23 million to 765,000 per day — and far fewer new addresses are being created every day.

Bitcoin transaction fees are also much lower now, although this makes the network cheaper to use. They have fallen to around $7 on average per day, down from a peak of $54 per transaction in April.

The one metric defying the trend is the amount of capacity in the Bitcoin Lightning network. Since starting the year at about 1,000 bitcoin ($35.3 million at current prices), the amount of bitcoin locked up in the network has rapidly increased, rising to 1,640 million ($57.9 million) today.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.



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Bitcoin

Bitcoin Gathers Upside Momentum; Resistance Near $40K


Bitcoin (BTC) buyers remained active during Asia hours and defended initial support around $33,800. The next level of resistance is seen between $38,000-$40,000, which is near the top of a month-long range.

The $30,000 support level was re-tested over the weekend, marking a higher low from the June 22 shakeout around $29,000. Price remains elevated and could break above the 100-period moving average on the four-hour chart.

Bitcoin was trading around $35,000 at press time and is up 4% over the past 24-hours.



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Ethereum

What to know about investing in bitcoin trusts


Chris Ratcliffe/Bloomberg via Getty Images

As the Securities and Exchange Commission punts decisions on approving bitcoin exchange-traded funds, companies have created other options to meet the growing demand for cryptocurrency.

One alternative, bitcoin trusts, holds the digital currency, making it easier for investors to add cryptocurrency to their portfolios.

“You’re more or less buying a basket that has bitcoin inside of it,” said financial planner Zechariah Schaefer, founder of Ascent Personal Finance in Lynchburg, Virginia.

Bitcoin trusts allow investors to buy exposure to the digital currency through brokerage or retirement accounts without the wallet, key or storage concerns of cryptocurrency exchanges.

More in Personal Finance:
As SEC delays bitcoin ETFs, other choices emerge for investors
There’s a push to bring bitcoin to 401(k) plans
Here’s why cryptocurrency crashes on weekends

“The trusts are just an easy way for investors to get access to the underlying bitcoin without buying it directly,” said Tyrone Ross, CEO of Onramp Invest, a company providing “cryptoasset” management technology to financial planners.

While bitcoin trusts may offer a simpler way to invest in cryptocurrency, there are downsides to consider, financial advisors say.

What to know before investing

A bitcoin trust operates differently than a mutual fund or ETF. These trusts periodically sell a limited number of private shares to so-called accredited investors, who meet strict income, net worth and experience requirements. 

Later, those accredited investors may sell their shares through public markets. But the prices may not match the underlying asset, known as trading at a discount or premium.

For example, if someone buys $1 of a bitcoin trust, their share may have 70 cents of bitcoin or $1.10 of bitcoin, depending on the asset’s demand. 

“There’s another layer of supply and demand volatility surrounding it,” said Schaefer.

Currently, the most popular choice is the Grayscale Bitcoin Trust, with $21.7 billion assets under management. Osprey Bitcoin Trust released a competing option in February, managing nearly $91.2 million.

By comparison, Vanguard’s 500 Index Fund, tracking 500 of the country’s largest companies, has $231.84 billion in assets.

Another downside of investing in bitcoin trusts is the fees, which are typically more than the average mutual fund or ETF.

For example, the average expense ratio for ETFs dropped to 0.45% in 2019, according to Morningstar. Grayscale charges an annual fee of 2%, whereas Osprey’s is 0.49%.

For most people, it may be cheaper to buy bitcoin through a cryptocurrency exchange, like Coinbase, Schaefer said.

However, someone may be willing to pay more to avoid cryptocurrency exchanges or to add bitcoin exposure in their regular individual retirement account.

“Right now, if you really want to have your crypto in a tax-advantaged retirement account, then you just have to bite the bullet and pay those high costs,” Schaefer added.

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ekrona

3 Reasons You Need to Be Careful When Buying Bitcoin


Earlier in the year, internet-fueled “meme stocks” blew up, and now, cryptocurrencies seem to be the next big thing. While there are many digital currencies you can invest in, you may have your eye on Bitcoin, since it’s arguably the most well-known.

A lot of investors have had success investing in Bitcoin, so you may be eager to follow in their footsteps. Here’s why you need to be especially cautious when considering Bitcoin.

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1. It’s very volatile

If you have a brokerage account and invest in stocks, you may be no stranger to market volatility. But as wildly as stock prices can swing, Bitcoin can swing even more.

Earlier this month, Bitcoin fell to a three-month low after Tesla CEO Elon Musk announced that the company was hitting pause on accepting the currency. If you’re going to buy Bitcoin, gear up for what could be a very intense ride.

2. It’s still pretty speculative

When you invest in stocks, you can put your money into companies that have been around for decades. In fact, many stocks within the S&P 500 (a market index that consists of the 500 largest publicly-traded companies) have been around for upward of 100 years.

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Bitcoin, on the other hand, has only been around since 2009. It doesn’t have the long history — or performance — that stocks have. It’s also unclear whether Bitcoin’s value will really increase long term. Much of that will hinge on whether it becomes a widely accepted form of currency, and it’s too soon to know that. So if you’re comparing Bitcoin to stocks, there’s really no comparison — they’re totally different beasts, and the long-term performance of stocks can’t in any way predict how Bitcoin will fare in time.

3. Your account could get hacked

Security breaches happen on the internet all the time, but that could put your Bitcoin (or any cryptocurrency) investment at risk. A number of digital currency exchanges have been subject to hacking incidents, and you could suffer serious losses if you choose an exchange with lackluster security.

The good news is that most large crypto exchanges have strong security measures in place. But if you’re going to buy Bitcoin, find one that offers insurance, so you get some amount of protection.

Weighing your options

You may decide Bitcoin is right for you based on your investing strategy and tolerance for risk. And that’s not necessarily a bad call. Investing in Bitcoin isn’t always a bad idea — for some people, it’s a great idea. The key is to understand some of the key risks before you make that decision.

Furthermore, if you’re new to cryptocurrencies, you may want to look at different currency options before settling on Bitcoin. You may find that there’s another that’s a more suitable fit for you.



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Bitcoin

Don’t Believe the Bitcoin Bounce. The U.K.’s Binance Restrictions Are Bad News for Cryptocurrencies.



Photo illustration by Edward Smith/Getty Images

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Ethereum

Virgin Galactic, Carnival, United Rentals, Bitcoin: What to Watch When the Stock Market Opens Today – The Wall Street Journal



Virgin Galactic, Carnival, United Rentals, Bitcoin: What to Watch When the Stock Market Opens Today  The Wall Street Journal



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Buy these stocks as S&P 500 heads for 11% correction and bitcoin risks fall to $12,000, say strategists.


Stocks are set for a mixed day ahead while crypto is surging, as even the slow days of summer trading continue to keep the black clouds away from financial markets.

It may not last for long.

Our call of the day, from strategists Barry B. Bannister and Thomas R. Carroll at the equity trading desk of investment bank Stifel, is that the S&P 500 is heading for an 11% pullback while bitcoin could fall to $12,000.

The “recovery trade” that has defined the recent bull market is headed for a further correction in the second half of 2021, the strategists said. Cyclical stocks—industrials, energy, materials, financials, tech, and discretionary—will fall relative to defensive stocks like staples, healthcare, utilities, and real estate, Bannister and Carroll said.

This will weigh down the S&P 500
SPX,
+0.33%
,
and Stifel’s strategists say that the blue-chip index is heading for an 11% drop to 3,800 points.

The likely catalysts for this major shift, according to the team at the investment bank, are the U.S. PMI Manufacturing Index fading faster than expected in the second half of the year, and the dollar strengthening.


Chart via Stifel.

Bannister and Carroll said the primary causes are a slowing global money supply in U.S. dollar terms—as central banks ease pandemic-era supports—as well as distortions from quantitative easing, and the lagged effect of China’s policy tightening.

A sea change of this magnitude will create distinctive winners and losers, the strategists said. Investors can prepare by buying shares in companies focused on defensive industries: pharma and biotech; food and staples retailing; commercial and professional services; food, beverage, and tobacco; utilities; healthcare equipment and services; household products; consumer services; and telecommunications.

https://www.marketwatch.com/

Chart via Stifel.

But avoid the stocks set to be losers, identified by the team at Stifel as: banks; insurance; software and services; real estate; energy; diversified financials; semiconductors; technology hardware; materials; capital goods; and autos and components.

Other casualties that Bannister and Carroll expect to see are bitcoin
BTCUSD,
+4.75%

and copper
HG00,
-0.56%
,
which are both sensitive to slowing global liquidity and the stronger dollar. The strategists at Stifel see bitcoin falling from around $34,000 to $12,000 if global M2—a measure of the money supply—drops to low-single digits year-over-year, as they expect.

https://www.marketwatch.com/

Chart via Stifel.

The buzz

Tesla
TSLA,
-1.17%

is recalling more than 285,000 vehicles in China, including more than 90% of the cars the company makes locally, because of safety risks associated with the cruise control system, the Chinese market regulator said Saturday. The regulator said an investigation found that the Teslas cruise control system could be accidentally activated and potentially result in an unexpected speed increase.

It’s a light day on the U.S. economic front. Investors can expect more questions about inflation when the New York Federal Reserve President John Williams speaks at 9:00 a.m. Eastern, before the Dallas Fed publishes Texas’ manufacturing outlook survey.

More than 150 people remain missing at the site of the condo building that collapsed in Miami, Florida, early last Thursday, with nine people confirmed dead. No one has been pulled alive from the rubble since hours after the collapse on Thursday.

Over the weekend, the U.K.’s lead financial regulator banned Binance, one of the world’s most popular crypto exchange networks, in the latest regulatory crackdown on digital assets. But cryptos have shrugged off the news, with the likes of bitcoin, ethereum
ETHUSD,
+10.29%
,
and dogecoin
DOGEUSD,
+4.62%

surging.

European-listed shares in Nokia
NOKIA,
+6.12%

jumped more than 6%, catching up the U.S.-listed stock’s
NOK,
+6.03%

rally from Friday after investment bank Goldman Sachs upgraded the telecom equipment maker to buy from neutral.

The markets

U.S. stock market futures were mixed
YM00,
-0.06%

ES00,
+0.07%

NQ00,
+0.29%
,
while European equities were broadly lower
SXXP,
-0.20%

UKX,
-0.36%

PX1,
-0.37%

DAX,
+0.01%

along with Asian stocks
NIK,
-0.06%

HSI,
-0.07%

SHCOMP,
-0.03%
.

The charts

https://www.marketwatch.com/

Chart from Natixis via the Irrelevant Investor financial blog.

“Investor expectations are way out of whack with reality,” according to Michael Batnick, of the Irrelevant Investor financial blog

Our chart of the day, from investment bank Natixis, via Batnick, shows the expectation gap between financial professionals and individual investors in 17 countries—and that American investors expect 17.5% real returns over the long term.

“The S&P 500 has returned 10.4% over the long term. The idea that we’re going to get 17% real, after getting 17% nominal over the last 5 years, is nothing short of absurd,” Batnick said.

Moreover, return expectations have continued to rise year-over-year:

https://www.marketwatch.com/

Chart from Natixis via the Irrelevant Investor financial blog.

Random reads

Doe, doh! Two Australian men were sunbathing nude on a beach when they were startled by a deer—so they ran into a nearby forest, and got lost. Police fined the pair after aircraft and emergency services were scrambled to rescue them.

“I’ve never seen that many zeros”: A couple from Baton Rouge, Louisiana were the recipients of $50 billion mistakenly deposited into their bank account.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch writers.



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Bitcoin

Does Your 401(k) Let You Invest in Bitcoin?


If you’d invested $1,000 in Bitcoin (CRYPTO:BTC) in 2010, you’d probably already be retired — and living a pretty extravagant lifestyle at that. And with some crypto-bulls asserting that the original cryptocurrency’s price could one day exceed $100,000 per token, it’s understandable that many people might be wondering if Bitcoin could help fund their retirements too. 

Anything’s possible, but if you’re hoping to use your 401(k) funds to invest in Bitcoin, you could run into a surprising problem.

Image source: Getty Images.

Why it pays for your employer to be conservative with 401(k) options

In a typical 401(k), the company offers its employees a limited menu of choices in which they can invest, generally mutual funds and ETFs. Some may allow them to invest in company stock as well. But few businesses enable their employees to invest in anything they want. You can thank the Employee Retirement Income Security Act of 1974 (ERISA) for that.

This law does some great things to protect the rank-and-file worker’s retirement savings, including requiring plan trustees (i.e., the employers) to act as fiduciaries. This means they have a legal obligation to take prudent care of their employees’ money. If they don’t do this, they could be held liable for the losses their employees incur.

One of the most common reasons 401(k) participants sue their employers is because of inappropriate investment choices. They argue that the employer, or the financial advisor who selected the investment options on behalf of the employer, didn’t take adequate care when choosing those securities and, as a result, exposed plan participants to an undue level of risk and caused them to lose money. 

Obviously, no business owner wants to be put in that situation. As such, they tend to be wary about offering up risky investment options. That’s why you probably can’t invest in Bitcoin through your 401(k).

All cryptocurrency prices are largely based on speculation right now. It’s possible Bitcoin could exceed $100,000 a token someday, but it’s also possible that the cryptocurrency frenzy will die down, that other headwinds will sap tokens’ values, or that Bitcoin’s leadership spot will be usurped by another coin. No investment is risk-free, but there’s clearly more risk involved in putting money into these new and still fairly unproven assets than there is in investing in diversified mutual funds.

Is there any way to invest your retirement savings in Bitcoin?

If you’re really serious about making Bitcoin a part of your retirement portfolio, there are ways you can do it. If your employer offers a self-directed 401(k), you may be able to buy cryptocurrencies directly through that account. Check with the HR department to see if this is an option at your company, or to discuss the possibility of making it available to interested employees.

You could also open a self-directed IRA. This is similar to a regular IRA, but it enables you to invest in some types of assets a regular IRA doesn’t, including cryptocurrency. This type of account isn’t as common as Traditional or Roth IRAs, so you’ll have to do some research to find out which brokers offer them. Look into the investment options, too, to make sure Bitcoin is a possibility. Not all self-directed IRAs offer the same set of investment choices, and you wouldn’t want to go through the trouble of opening one only to find out it’s not what you needed.

Perhaps the best option for most people is to not invest their retirement savings in Bitcoin at all. Instead, invest some of your extra cash in Bitcoin through a cryptocurrency exchange. You won’t enjoy the same tax breaks that you’d get if you were holding those assets in a retirement account, but it will give you an opportunity to get some skin in the game without jeopardizing your retirement savings.

If Bitcoin prices end up soaring, you could always sell your tokens and use that money to retire anyway. That could actually be the better choice if you’re still young, because you usually pay a penalty for withdrawals made from retirement accounts while you’re under 59 1/2.

Or if you see Bitcoin as too risky for your investment portfolio, you could invest in some safer securities. Cryptocurrency stocks are one option to consider. There are a number of established companies that are positioned to profit if crypto becomes a more mainstream asset, but that could also make you a lot of money even if Bitcoin never goes anywhere. Or there’s always the option of investing in a good old-fashioned S&P 500 index fund.

Your retirement savings will be your financial lifeline in your senior years, so gambling with it isn’t wise. Think carefully before deciding whether you’d like to invest your retirement savings in Bitcoin. If you do, make sure you’re diversified into plenty of other investments as well so that the cryptocurrency’s ups and downs don’t weigh too heavily on your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.





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