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Bitcoin bulls join forces with Wall Street
A new era of crypto trading is expected to begin as soon as today, after the S.E.C. finally approved the creation of new exchange-traded funds that would allow investors to more easily buy and sell Bitcoin.
The regulator yesterday authorized 11 fund managers — including the Wall Street fund giants BlackRock and VanEck and smaller companies like GrayScale and Valkyrie — to begin offering the new crypto investment products.
In anticipation of the decision, the companies have been aggressively cutting their management fees to gain an early advantage. “The fundamental change is a whole lot more money is coming into this asset class,” Paul Grewal, the chief legal counsel of the crypto exchange Coinbase, told DealBook. Matthew Sigel, the head of digital asset research at VanEck, called it a “historic” moment.
Bitcoin hit a 21-month high this week, as crypto boosters shrugged off a series of high-profile bankruptcies and a sweeping legal crackdown against some of the biggest players in the sector. That said, the cryptocurrency’s price barely budged this morning, trading below $47,000, giving the digital token a market value of roughly $920 billion.
How big could the market get? Unsurprisingly, crypto buyers and those offering the Bitcoin E.T.F.s think the potential is limitless. Grewal said investors could pour billions of dollars into digital asset markets in the short term, and trillions over time.
But even some outside the sector see reason for growth. “We anticipate further prices increases in the current year,” the Deutsche Bank researchers Marion Laboure and Cassidy Ainsworth-Grace wrote a note to investors today. They added that a flood of institutional investors and expected new crypto-trading regulation, including in the European Union, could bolster the market for digital assets.
The S.E.C. approval gives crypto a stamp of legitimacy. Gary Gensler, the S.E.C. chair and a frequent critic of the asset, said the new Bitcoin investment products would feature familiar investor protections. The fund providers will have to file public registration statements and periodic financial filings, for instance.
But he warned that the approval was not an endorsement. “Bitcoin is primarily a speculative, volatile asset that’s also used for illicit activity including ransomware, money laundering, sanction evasion and terrorist financing,” he said in a statement. Cathie Wood, one of Bitcoin’s most vocal champions whose firm won approval yesterday for a Bitcoin E.T.F., said Gensler had “denigrated” the sector.
Is an Ethereum fund next? The industry and its lobbyists in Washington believe that the Bitcoin E.T.F. approval will lead to similar funds for other cryptocurrencies. VanEck has a pending application for an E.T.F. tied to Ethereum, the second-largest crypto asset by market capitalization.
HERE’S WHAT’S HAPPENING
Natural gas giants agree to combine. Chesapeake Energy said it would acquire Southwestern Energy in an all-stock deal valued at $7.4 billion, creating one of the nation’s largest energy producers. It’s the latest big deal in the oil and gas sector in recent months, even as lower oil prices weigh on the industry’s profits.
Tech giants announce a new wave of layoffs. Amazon said it would cut hundreds of jobs in its Prime Video and studios businesses, and more than a third of the work force at the streaming platform Twitch. And Google cut hundreds of jobs as it looks to lower costs and doubles down on artificial intelligence.
Chris Christie bows out of the presidential race. The vocal anti-Trump candidate suspended his long-embattled campaign yesterday. But comments dismissing his Republican rivals that were caught on a hot mic — Christie said Nikki Haley was “going to get smoked” — appeared to undercut his efforts to stop Donald Trump. (Haley and Ron DeSantis traded barbs at another debate while Trump participated in a town hall event on Fox News.)
Alaska Airlines keeps Boeing’s 737 Max 9 planes grounded. The company said it wouldn’t resume flights using the planes until at least Saturday. The airline was awaiting instructions on how to inspect its planes after the F.A.A. said on Tuesday that initial rules provided by Boeing needed to be revised.
Skydance Media is said to weigh a bid for Shari Redstone’s National Amusements. David Ellison, the C.E.O. of Skydance, is in talks with investors, including his father, Larry Ellison, an Oracle founder, about an all-cash bid for the parent group of Paramount Global, according to The Wall Street Journal. If successful, the group would reportedly look to combine Paramount with Skydance, the studio behind “Top Gun: Maverick.”
What to watch this earnings season
Heading into third-quarter earnings in early October, stocks were sputtering as investors worried about persistently high inflation and rising oil prices. They were surprised by a strong batch of results that helped lead to an impressive year-end rally for the S&P 500.
With fourth-quarter earnings announcements set to begin tomorrow — up first are Bank of America, BlackRock and JPMorgan Chase — Wall Street is hoping for an extension of those impressive gains. Here’s what to watch for.
Analysts forecast slight growth. While the three months up to Dec. 31 are expected to show a second straight quarter of gains, bottom-line growth is forecast to be up just 1.3 percent on an annualized basis, according to FactSet. And that will largely come from just two sectors, tech and utilities.
Six tech giants were the biggest winners of last quarter. Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia are expected to report a combined 56 percent year-on-year growth, according to Bank of America.
But with the global economy showing signs of slowing, few on Wall Street are predicting a repeat of Big Tech’s lofty 2023 stock gains. “Another year of a select few megacap tech companies driving all of the stock market’s return is completely off the table,” David Bahnsen, the chief investment officer at The Bahnsen Group, wrote yesterday to investors.
Doubts are creeping in about Apple. Last week, analysts at Barclays and Piper Sandler downgraded the tech giant on concerns over slowing iPhone sales and questions about its business in China.
It’s a mixed picture for banks. A swift fall in Treasury yields last quarter was “a substantial positive” for lenders’ capital holdings, Sean Ryan, FactSet’s vice president and director for banking and specialty finance, wrote in a research note.
But continued weakness in their investment banking businesses and the uncertain corporate real estate market will again put pressure on earnings, he added. Watch for updates on their lending business, and especially on loan-loss provisions, for signs of the health of households and the wider business sector.
“It’s unclear to us if we are talking about re-establishing safe passage into the Red Sea in a matter of days, weeks or months.”
— Vincent Clerc, the C.E.O. of the shipping giant A.P. Moller-Maersk. He warned in The Financial Times that attacks on commercial traffic by Iran-backed Houthi forces, which have forced some companies to reroute vessels around Africa, could hurt global growth.
Disney’s latest homegrown headache
Disney already faces a number of challenges, including pressure from the activist investor Nelson Peltz and questions about its business strategy and succession planning.
Now it’s dealing with a headache from ESPN, which generates a huge proportion of its profit, thanks to one of the sports network’s big new stars.
The dust-up centers on Pat McAfee, an N.F.L. punter turned shock jock, whom ESPN poached last year from the betting company FanDuel in a deal reportedly worth $85 million. (A personal pitch from Bob Iger, Disney’s C.E.O., apparently helped seal the deal.)
But McAfee occupies an unusual perch at ESPN: He is both an employee who appears on college football and N.F.L. shows and, when it comes to his own daily show, a contractor. That means the network has less control over him, The Times’s Kevin Draper reports.
What happened: First, Aaron Rodgers, the New York Jets quarterback who frequently appears on McAfee’s show, implied that the late-night comedian Jimmy Kimmel — one of the biggest stars at the Disney-owned ABC — had ties to Jeffrey Epstein. (Kimmel, whose name didn’t emerge from recently unsealed court records related to the late sex offender, has threatened to sue Rodgers.)
After The New York Post published unflattering ratings data for McAfee’s show, the host then accused Norby Williamson, a senior ESPN executive, of leaking the information. McAfee called Williamson, long known as the network’s internal talent disciplinarian, a “rat.”
McAfee represents a dilemma for Disney. His public squabbling with colleagues was highly unusual, as was letting Rodgers impugn another ABC star. “There’s “no more offensive crime” at the network than “talent-on-talent” crime, said Jemele Hill, a former ESPN star. (McAfee has apologized for the episode with Rodgers, and the quarterback, who later said he was joking, won’t appear on the show for the remainder of the N.F.L. season.)
But Disney has bet that McAfee is a bridge to the future, given his following among younger sports fans. ESPN noted on Jan. 5 that McAfee’s show garnered 886,000 average viewers per episode in December across its network, YouTube and TikTok, and he’s believed to be bringing in Generation Z viewers to other shows.
Two caveats: On ESPN alone, McAfee loses 48 percent of his lead-in audience, according to The New York Post. And ESPN only licenses McAfee’s show, meaning that the network doesn’t get a cut of the revenue it collects from other platforms.
The entertainment giant has other concerns. In ESPN’s negotiations over N.B.A. media rights, the league could push for more games to be shown on ABC, meaning that the two networks could be further integrated. But more controversy at ESPN could make that process fraught.
THE SPEED READ
Deals
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Shares in Hewlett Packard Enterprise fell nearly 9 percent after it announced a $14 billion deal to buy Juniper Networks, the communications equipment and services provider. (WSJ)
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The advertising giant WPP is reportedly weighing options for divesting its 40 percent stake in Kantar, the market data company. (Bloomberg)
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What next for Comcast’s Brian Roberts, one of the media industry’s biggest deal makers? (Puck)
Artificial intelligence
Best of the rest
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“Is America’s Ultra-Processed Diet That Bad? Big Food Fights Back.” (WSJ)
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Nick Saban, one of the most successful coaches in the history of college football, is retiring from the University of Alabama. (The Athletic)
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