US stocks climb as economic optimism overshadows rise in inflation

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The New York Stock Exchange stands in lower Manhattan.

  • US stocks trade higher on Friday as investors shrug off fresh data showing a rise in inflation.
  • The Personal Consumption Expenditures price index gained 0.6% in April and 3.6% year-over-year as American spending rebounded.
  • “This report puts the Fed in a really good place, inflation is up, but real yields are still low,” an expert said.
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US stocks trade higher on Friday as investors shrug off fresh data showing a surge in inflation.

The Personal Consumption Expenditures price index – a key measure of domestic inflation – gained 0.6% through April, the Commerce Department announced Friday, as American spending rebounded.

The jump is the largest single-month gain since 2008, in line with the median estimate of a 0.6% increase from economists surveyed by Bloomberg.

The PCE index also notched a 3.6% year-over-year gain, surpassing the median estimate of 3.5%

“This report puts the Fed in a really good place, inflation is up, but real yields are still low,” Jamie Cox, managing partner for Harris Financial Group, said in a statement. “This is basically a transitory sweet spot.”

US stocks closed up Thursday, with the Dow Jones leading the S&P 500 and Nasdaq composite higher. The move came after weekly jobless claims fell to a fresh post-pandemic low, at 406,000.

Here’s where US indexes stood shortly at the 9:30 a.m. ET open on Friday:

Shares of AMC resumed their blistering rally in early Friday trading, jumping more than 10% to approach $30 – the highest price in years. As of Friday, AMC has been on a five-day hot streak amid hype from retail traders on Twitter and Reddit, and short-sellers are taking a major hit.

In the digital asset space, trading platform eToro added two decentralized finance tokens, Aave and Yearn.Finance YFI, to its trading offering this week, alongside crypto tokens Compound COMP and Decentraland MANA. DeFi has gained traction amongst crypto investors in recent weeks after having been long overlooked on account of its complex nature.

Meanwhile, the newly launched Crypto Council for Innovation, an industry group that includes heavyweights such as Square, Fidelity, Coinbase, and Paradigm, is looking for a new boss, DealBook first reported Friday. The news of CCI’s hunt for new leadership comes as authorities are mulling ways to increase oversight of crypto.

Oil prices were higher. West Texas Intermediate crude jumped as much as 0.70%, to $67.32 per barrel. Brent crude, oil’s international benchmark, rose 0.46%, to $69.78 per barrel.

Gold fell as much as 0.23%%, to $1,893.64 per ounce.

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The use of central bank digital currencies would fuel demand for other crypto assets, study shows

A woman takes a photograph on her mobile phone of artwork by Andy Warhol called Dollar Sign.
A woman photographs ‘Dollar Sign’, a 1981 art piece by Andy Warhol.

  • The establishment of digital currencies by central banks would encourage wider demand for crypto assets, according to a study by the Economist Intelligence Unit.
  • 59% of study respondents held that view of influence by central banks on digital assets.
  • China is running a pilot digital program and the Fed has stepped up efforts around a digital dollar.
  • See more stories on Insider’s business page.

Digital currencies established by central banks would stoke wider demand for crypto assets, according to an Economist Intelligence Unit study, which comes as central banks including the Federal Reserve have been stepping up work in this area.

59% of study respondents agreed that the launch of digital currencies by official monetary authorities would lift up use of other forms of digital currencies and assets that are not backed by governments. The EIU study, commissioned by crypto exchange platform, posed the question to 200 institutional investor and corporate treasury management officials between February and April.

A central bank digital currency, or CBDC, is a type of central bank liability – like the US dollar – issued in digital form.

Meanwhile, 78% of the institutional and corporate survey takers consider the issuance of CBDCs as necessary to establish a functioning market for new financial instruments, such as digital bonds, to supplement the role of cryptocurrencies.

“If people get used to central bank money that is digital-they have access to central bank money in a digital format-that obviously makes them more comfortable to use other digital currencies,” Henri Arslanian, the crypto leader at PwC, one of the world’s largest auditing and financial services firms, was quoted as saying in the EIU study.

Central banks are “late to the race” in digital adoption but they still carry influence in such matters, the study said.

On tap for central banks, Federal Reserve Chairman Jerome Powell recently said the Fed plans this summer to publish a paper on its thinking about digital payments as the bank advances its efforts in potentially creating a digital dollar. The Chinese government has launched a pilot program centered on a digital renminbi and the UK said it’s coordinating exploratory work on a CBDC dubbed “britcoin.

In Sweden, the central bank in April was moving toward testing with banks a so-called e-krona. The Bahamas became the first country to launch a digital version of its fiat currency with the October 2020 launch of the digital Sand Dollar.

The EIU study found that 74% of respondents believe their countries are or will become cashless.

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Paul Krugman throws in the towel on calling the demise of bitcoin: ‘Think of it as a cult that can survive indefinitely’

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  • Nobel Prize-winning economist Paul Krugman said he’s given up on predicting the “imminent demise” of bitcoin.
  • In a string of comments on Twitter, Krugman outlined what he sees as flaws in the cryptocurrency, but begrudgingly admitted it’s likely here to stay.
  • Krugman called bitcoin investing a “cult that can survive indefinitely.”
  • See more stories on Insider’s business page.

Bitcoin isn’t a convenient medium of exchange and carries with it other shortcomings. But Nobel Prize-winning economist Paul Krugman has begrudgingly admitted that the cryptocurrency is here to stay.

“BTC isn’t a new innovation; it’s been around since 2009, and in all that time nobody seems to have found any good legal use for it,” wrote Krugman in a string of comments he posted about bitcoin on Twitter on Wednesday.

He continued: “But I’ve given up predicting imminent demise. There always seem to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely.”

The New York Times opinion columnist has previously called himself a “crypto skeptic” and on Wednesday he outlined what he sees as flaws in bitcoin, the world’s most traded digital currency.

“It’s not a convenient medium of exchange; it’s not a stable store of value; it’s definitely not a unit of account,” he wrote. “Its value rests on the perception that it’s a technologically sophisticated way to protect yourself from the inevitable collapse of fiat money, which is coming one of these days, or maybe one of these centuries. Or, as I say, libertarian derp plus technobabble.”

His comments echoed his July 2018 article in which he said he could be wrong about holding a skeptical view toward cryptos. “But if you want to argue that I’m wrong, please answer the question, what problem does cryptocurrency solve?”

Krugman – who won the Nobel Prize in Economic Sciences in 2008 for his work on international trade theory – posted his comments on Twitter on the same day of a massive selloff in bitcoin and other cryptocurrencies after the People’s Bank of China said digital tokens can’t be used as a payment form by financial institutions.

Bitcoin at its lows fell 31% to around $30,000 on Wednesday before paring losses.

Read more: ‘Wolf of All Streets’ crypto trader Scott Melker breaks down his strategy for making money using ‘HODLing’ and 100X trade opportunities – and shares 5 under-the-radar tokens he thinks could explode

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Shark Tank star Kevin O’Leary once called bitcoin ‘garbage’, but said the cryptocurrency now makes up 3% of his portfolio

kevin o'leary
  • Shark Tank investor Kevin O’Leary said he has allocated 3% of his portfolio to bitcoin, which he once considered “garbage”.
  • O’Leary said in an interview with Yahoo Finance he’s working on organizing a “council of sustainability” to include corporations and governments that are mining bitcoin responsibly.
  • O’Leary bought bitcoin as Canada and other countries have eased restrictions on institutional buying of the cryptocurrency.
  • See more stories on Insider’s business page.

“Shark Tank” investor Kevin O’Leary has allocated 3% of his portfolio to bitcoin and is aiming to bolster sustainability in mining for the world’s largest cryptocurrency.

O’Leary told Yahoo Finance Live in an interview that aired Wednesday that he made the allocation after Canada, where he’s from, and other countries eased restrictions on institutional purchases of bitcoin. Regulators in Canada so far this year have approved the launch of four cryptocurrency exchange-traded funds.

The chairman of O’Shares ETFs, who called bitcoin “garbage” in a May 2019 interview on CNBC, said in March that he would be adding bitcoin to his portfolio partly because he thought of it as a hedge against inflation. He told Yahoo Finance Live that after his announcement he received numerous calls from institutional investors asking if he knew where the coins originated. He warned that “there’s a big problem brewing” in the crypto industry how and where coins are mined.

He said he’s working to make sure every coin he owns is compliant.

“I know the provenance of where my wallet coins were mined now, and that means I’ve had to take equity positions in miners. I’ve had to start investing in them with the covenants in place that I would like to be paid back in a royalty of a clean coin,” O’Leary said.

He also said he’s working on organizing a “council of sustainability” to include corporations and governments that are mining coins responsibly.

Bitcoin is a target of criticism in part because its digital mining process requires a significant amount of energy. Research from Cambridge University shows it uses more energy each year than Sweden and Argentina.

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The US is still waiting on its first bitcoin ETF. Here’s what experts say the SEC wants to see before giving approval.

The SEC has a number of applications for bitcoin ETFs to review.

  • The SEC has started reviewing applications for bitcoin exchange-traded funds, which have yet to launch for trading in the US.
  • The regulator will consider bitcoin’s volatility and market maturity in rendering a decision whether or not to greenlight the products, experts say.
  • The SEC recently pushed back a decision on a bitcoin ETF until at least this summer.
  • See more stories on Insider’s business page.

Bitcoin’s fast-growing popularity, increasingly elevated profile in corporate America and swelling market capitalization above $1 trillion have retail and Wall Street investors alike questioning if and when a bitcoin exchange-traded fund can be traded in the US. Those questions are currently before the Securities and Exchange Commission which is being asked in at least nine applications for the green light to launch what could be the first cryptocurrency ETF in the country.

But a decision may have to wait at least until mid-June. The SEC this week delayed rendering a decision on a bitcoin ETF from asset manager VanEck that, if cleared, would be listed by CBOE Global Markets. The Commission said it was “appropriate” to take more time for consideration.

The arrival of a bitcoin ETF in 2021 would follow this month’s start of trading in shares of Coinbase, the first cryptocurrency exchange to go public, as well as expanding acceptance of bitcoin as payment methods by companies including electric vehicle maker Tesla. Meanwhile, investment bank JP Morgan is preparing to introduce its first bitcoin fund for wealthy clients.

These and other bitcoin developments may signal the increased likelihood that a bitcoin ETF will gain approval, but the SEC has rejected other attempts.

Institutions “are getting in from hedge funds on Wall Street to PayPal, to Venmo, to Visa. So [the SEC] can’t really ignore this because the market is deciding that they want to be involved,” Ian Balina, founder and CEO of Token Metrics, a data-driven cryptocurrency investment research platform, told Insider.

Here are three hurdles and tailwinds that experts say stand in front of the first US bitcoin ETF:

1) Bitcoin volatility

The world’s most widely traded digital asset is well-known for its wild price swings, with gains or losses of 10% during a session not uncommon.

“The SEC has a difficult job balancing the clearly overwhelming desire for the market to have access to BTC via an ETF versus the inherent volatility that the asset class has at this stage in its life cycle,” George McDonaugh, co-founder of digital asset investment firm KR1, told Insider. “Volatility would be one of the major considerations. Bitcoin is very scarce and comparatively still a very young asset class. The volatility should dampen over time but that might be long after the market loses patience waiting for [a bitcoin ETF].”

Price volatility has declined in recent weeks and such moves make bitcoin more appealing to institutions, according to JPMorgan.

Liquidity in the bitcoin market had also been a factor under consideration by the SEC.

“I think it’s less of a concern now [than] in the early days … and a lot of that is tied to institutional players coming into and creating depth and breadth in the market,” Matteo Dante Perruccio, president international of Wave Financial, a US-regulated digital asset manager, told Insider. “If it’s 90% retail investors in an asset and you open it up to a bigger universe of retail investors, I think that’s a really hard decision to make as a regulator. But it helps you have substantive institutional investors trading and involved in investing in it.”

Read more: Binance CEO Changpeng Zhao breaks down how he built the world’s largest crypto exchange in 180 days – and shares why he’s keeping most of his assets in Bitcoin and Binance Coin

2) Market maturity

“It’s fair to say if you look at the denials for the last several ETFs, you can see that there was concern among several of the commissioners that the bitcoin market was not sufficiently regulated and, in their view, was susceptible to manipulation,” and “when I say that I mean that manipulation would show up in prices,” Amy Doberman, a partner in the securities department at law firm WilmerHale, told Insider.

“I think what you’re going to see with the pending requests for approval is an argument that the market is far more developed than it was four or five years ago and that there’s a lot more price discovery available than there was even just a few years ago so that there will be the ability to reference actual trades and sufficient information to develop accurate prices,” said Doberman.

3) What’s on the SEC’s plate

The US lags behind other countries in approving bitcoin ETFs, with Canada this year approving the first publicly traded bitcoin ETF in North America, the Purpose Bitcoin ETF, as well as ethereum ETFs. Brazilian regulators have reportedly approved two bitcoin ETFs.

“People underestimate the Canadian approval,” said Wave Financial’s Perruccio, characterizing as “close cousins” the SEC’s relationship with the Canadian securities regulator. “The regulators have got to be talking a lot and … you always feel more comfortable in company when you are making these bold decisions,” and Canada’s regulator is considered as well-respected, he said. For a US bitcoin ETF, “I feel like it’s inevitable. It’s no longer ‘if’ but ‘when’ and I think the question of when is probably in 2021. That’s my prediction,” said Perruccio.

While bitcoin ETF applications pile up, the SEC and its new chairman Gary Gensler have a range of other issues they are working on. Gensler, who was confirmed as chairman earlier this month, is seen by some bitcoin ETF proponents as a cryptocurrency advocate stemming in part from his teachings at MIT on the subject.

Gensler “will have to decide what he wants to prioritize,” said Doberman. He’s “obviously very knowledgeable about cryptocurrencies and hopefully will bring an additional level of sophistication and appreciation for the currency to the table,” she said.

During his confirmation hearing, Gensler said the SEC under his watch would review issues surrounding protection and fairness for retail investors in the backdrop of “gamification” on trading apps and platforms.

The agency is reportedly considering stricter rules to rein in projections made by special purpose acquisition companies, or SPACs, and reportedly has opened a preliminary investigation into leveraged trades at the Archegos Capital Management hedge fund that collapsed in March.

While he’s well-versed in the subject of cryptocurrencies, Gensler, who served as a chairman of the Commodity Futures Trading Commission under the Obama administration, will not just wave through bitcoin ETFs applications without scrutiny, said Noah Hamman, CEO of AdvisorShares, a firm that offers actively managed exchange-traded funds through its AdvisorShares Trust.

Gensler will be in the role “of looking at the rules and regs and deciding if either, one, something fits or two, do the rules and regs need to be modified to allow it to fit because it makes sense and it’s the right thing to do,” said Hamman. AdvisorShares does not have a bitcoin ETF filing with the SEC.

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Coinbase faces delisting on 2 European exchanges over reference code error

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Coinbase made its trading debut on Nasdaq this month.

  • Coinbase shares may be delisted from two European exchanges because of a coding error.
  • “A correct LEI code is a regulatory requirement for admission to trading in Europe,” said trading system Xetra.
  • The situation can be remedied with an application for an LEI, said Xetra.
  • See more stories on Insider’s business page.

Coinbase shares face delisting this week from two European trading venues run by Deutsche Boerse because of a coding error with the cryptocurrency platform.

The shares could be removed from the Xetra trading system and the Frankfurt Stock Exchange by the end of Friday, each said on their Twitter feeds on Wednesday.

Xetra said traded securities must meet various criteria, including having an LEI, or an individual 20-digit identification code.

“When Coinbase commenced trading, a LEI code was mistakenly used for a Coinbase entity that is not attributable to the entity introduced last week (Coinbase Global Inc.). A correct LEI code is a regulatory requirement for admission to trading in Europe,” wrote Xetra. “The only way for Coinbase to resume trading is for the issuer to apply for an LEI,” it said.

Coinbase became tradable on the Frankfurt stock exchange’s trading floor last Wednesday when the company’s direct listing debuted in the US on Nasdaq. Coinbase is the largest cryptocurrency exchange in the US and its going public has been called a milestone for the industry surrounding digital coins, tokens and blockchain technology.

Nasdaq-traded shares of Coinbase were up nearly 2% during Wednesday’s session. The stock reportedly was rated as a buy at Rosenblatt Securities on Wednesday.

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