Three Things (3/13)

LSE accepts Bitcoin ETN applications

The London Stock Exchange announced that it will accept applications from Bitcoin exchange-traded notes to join the exchange. The LSE’s admittance of cryptocurrency ETNs, very similar to the SEC’s approval of ETFs to start the year, would allow investors to gain exposure through a regulated and liquid investment vehicle that could be bought and sold in the same way as the S&P 500.

We expect that the acceptance of Bitcoin ETNs is another step towards wider global adoption and broader institutional adoption of cryptocurrencies. The growing desire for Bitcoin is making more traditional financial institutions want to incorporate the cryptocurrency into their offerings in an effort to mitigate the risk of getting “left behind.” The LSE, an institution that has existed since 1801, granting access to cryptocurrency is yet another example of institutions recognizing the appeal for a deflationary, decentralized store of value to diversify wealth.

TikTok’s window to sell

President Biden said he would sign a bill into law banning TikTok or forcing its sale due to national security concerns. TikTok, subsequently, made an effort to encourage users to call their representatives to stop the bill by just pressing a few buttons in the app. Lawmakers, however, grew frustrated and more confident in their decision, voting unanimously to advance the bill, which will force a sale of the app to an American owner or legalize the ban.

The way in which TikTok was able to mobilize its users and sway their behaviors to call government representatives demonstrates the raw power of social media. With that said, creators at the South by Southwest festival mentioned the need to shift their attention to competing platforms. Switching costs are low, and there are plenty of outlets that allow creators to monetize their content, oftentimes for more money than TikTok. TikTok has a short window for a potential sale before they see a shutdown that could tremendously diminish its value.

Inflation relief

The core consumer price index, excluding food and energy costs, increased 0.4% from January and increased 3.8% from a year ago. The monthly gain was in line with expectations, but the annual rate was slightly ahead of the 3.1% forecast. Shelter and gasoline prices contributed to over 60% of the overall monthly increase, although shelter’s price increase slowed from January. 

While the February CPI print showed inflation increases, investors actually feared a worse outcome after January’s CPI print and subsequent selloff. At the surface, inflationary pressures seem to be increasing, but they are still largely consistent with the prior understanding of the disinflationary process, trending downward and exceeding investors’ expectations. The Fed has a tough job ahead to achieve a soft landing but Tuesday's inflation numbers did little to alter the market’s conviction in the timing of interest rate cuts.

Disclosures:

IBIT is a holding in Titan Crypto.

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