So Gary did it. The famously crypto-hating chairman of the Securities and Exchange Commission, the man who so reviles digital coins that he called the market the “Wild West” of investing, full of looters, drug dealers and con artists, took a large step last week toward mainstreaming crypto as an asset class.
On Wednesday, the SEC finally approved the sale of exchange-traded funds that follow Bitcoin’s “spot” price. ETFs, of course, are baskets of securities that usually track an underlying index or an investment style; they’ve develop into increasingly popular with small investors who don’t need to own shares outright. If buying a bunch of Apple is simply too expensive, you may be an Apple investor buying an ETF that holds the stock, at a marginal cost.
For a small fee
The Bitcoin ETFs work the same way: They follow the day by day price of Bitcoin so that you don’t must shell out all that money to own it. You’ll be able to just call up your broker, or use your Robinhood app, to seamlessly purchase a chunk of this evil crypto casino.
And as I said, it’s low-cost: A single Bitcoin goes for around $43,000 — not exactly money quite a bit of average folk like your Aunt Millie have lying around. Now she will get a chunk of it for a small management fee — as little as .2% and without going through the hassle of buying fractional shares.
For a couple of basis points your Aunt Millie can do her part to facilitate liquidity in the global drug trade.
All kidding aside, if crypto is so bad, why did Gary Gensler go there? I even have my theories.
First, drug dealers do use crypto like Bitcoin to transact business, but additionally they use dollars as well. There are lots of ways to finance illegal activities outside the US banking system and its suspicious activity reporting system. Gensler has been around banking long enough to know that irrespective of how much of a crypto hater he’s.
Plus, he probably had no selection. I’m no crypto bro, but for all the hair on this market, it’s not going away. Courts have pushed back on some parts of his regulatory crackdown. Digital coins also survived the crypto winter; Bitcoin fell from nearly $69,000 to below $17,000, and a few say it could soon race back as much as its high of $69,000.
Crypto has survived the crash of FTX, and the fraud, arrest and imprisonment of its founder, the ultimate crypto bro Sam Bankman-Fried. Generally known as “SBF,” this mini Madoff stole his customer’s digital assets from the exchange so he could gamble in his failed side-hustle of a crypto hedge fund.
If there was no there there in digital currency, you’ll think the FTX demise would mark the ultimate denouement of this asset class, but it surely didn’t occur. Plus, approving an ETF to be traded on the Nasdaq or Latest York Stock Exchange might be the best way for Gary and his peeps to keep watch over things and keep investors distant from future Bankman-Frieds.
The largest reason, I think: Gary Gensler isn’t any match for Larry Fink. Should you didn’t notice BlackRock, the world’s largest money manager, is one of the 11 firms offering the recent ETFs. Fink, BlackRock’s founder and CEO, was once a crypto skeptic like Gensler. He isn’t any longer. Over time he got here to see crypto as “a store of value” rivaling the long-held status of gold.
Yes, those are his words.
In my words, Fink sees an honest money-making opportunity. Normalizing Bitcoin through an ETF could in some unspecified time in the future normalize it as an asset class with financial advisers. Once that happens, if the typical weighted portfolio of stock and bonds also includes some crypto, BlackRock’s ETFs will get first dibs because it has such tight relationships with the big brokerage firms.
Once Fink was all-in on the Bitcoin ETF, the pressure on Gensler became enormous. Fink has develop into a political lightning rod in recent times for his support of ESG (environmental, social and governance) investing.
His critics forget what got him here; he built the world’s biggest asset manager ranging from zero 30-plus years ago right into a $10 trillion business, and he has connections throughout DC and in each parties. (He was Donald Trump’s money manager). Furthermore, he has the people Gensler reports to in the Biden White House on speed dial.
Shari’s rescue?
A couple of month ago, I reported that Shari Redstone was desperately seeking to unload her ailing media empire, Paramount Global. She would do this by selling not the entire company, but her stake in National Amusements, the controlling shareholder.
Interested buyers included RedBird Capital and Skydance Media, owned by David Ellison, son of Oracle founder Larry Ellison. They’d all signed NDAs. Shari was seeking to preserve family wealth for future generations (National Amusements was the brainchild of her late dad, media mogul Sumner Redstone) as the legacy media business slowly collapses. She hoped to get about $2 billion and move on with life.
What’s different today? Lots of reports that she’s shopping her stake and interested parties signed NDAs. Sorry fellas, that isn’t really news; what’s news is the story of why it’s so hard to search out a buyer for legacy media assets lately.