MULTI-BILLION FRENZY

Bitcoin exchange-traded funds (ETFs) have emerged as strong investment contenders, garnering significant attention in the financial market. These ETFs have rapidly gained popularity, accumulating a substantial amount of Bitcoin assets totaling $63.3 billion so far this year. This accumulation represents 4.5% of the total circulating supply of Bitcoin, showcasing the growing importance of these ETFs within the cryptocurrency space. Noteworthy market leaders, including BlackRock, Grayscale, and Fidelity, have played pivotal roles in these advancements, capturing 84% of the market share collectively. Surprisingly, retail investors have taken the lead, contributing to 80% of the inflows into Bitcoin ETFs, while institutional investors are increasingly showing interest in this market. Nevertheless, it is worth remarking that not all cryptocurrency ETFs have experienced the same level of success, as Ethereum spot ETFs have struggled to gain traction, witnessing outflows of more than $103 million since their launch.

UNSUSTAINABLE PREMIUM

The software company MicroStrategy has seen a surge in its stock price relative to its Bitcoin holdings, reaching a premium of nearly 300%. However, a recent report from Steno Research has predicted that this premium is unsustainable, attributing the recent stock split and the launch of options on spot Bitcoin ETFs as factors that may lead investors to choose direct Bitcoin holdings over MicroStrategy stock. The company’s valuation is now diverging significantly from its assets and business fundamentals, indicating a potential market correction, and with increasing regulatory acceptance of Bitcoin and the overall crypto market, investors may opt for direct exposure to Bitcoin rather than holding MicroStrategy stock. Moreover, the note from Steno Research suggests that sustained buying demand would be necessary to uphold MicroStrategy’s current premium, especially as Bitcoin’s performance is expected to remain strong in the coming years. 

THE AI BOOM

In response to the rising interest in artificial intelligence (AI) as a profitable investment, a wave of AI-focused exchange-traded funds (ETFs) has emerged this year. With over a third of the two dozen ETFs now integrating AI in their names, the sector’s total assets have soared to $4.5 billion. Moreover, as there has been remarkable stock performances of AI companies like Nvidia, which has experienced a growth exceeding 200% in the past year, investor confidence in the AI industry has been boosted and many expect further growth. Recognizing this opportunity, major asset management firm BlackRock has introduced two new actively managed AI-themed ETFs, which are designed to capitalize on emerging opportunities in the dynamic AI market.

INTERNATIONAL NEWS

Global markets have been experiencing a tumultuous day as tensions in the Middle East escalated, leading to a widespread sell-off. The European markets opened to a somber mood, with the pan-European Stoxx 600 index in London dropping by 0.17%. In addition, a notable decline was seen in Dutch company Philips’ shares, which plummeted by 17% after the company revised down its sales forecast. The weekend brought news of Israel’s airstrikes in the Middle East, causing concerns about potential disruptions in oil supply, however, despite the losses witnessed in the European market, the fact that no oil or nuclear facilities were targeted, there was a 6% drop in oil prices. Moreover, in the Asia-Pacific region, markets showed resilience, with Japan’s Nikkei 225 and Topix indexes rising despite political instability in the country.

KEY EVENTS HAPPENING THIS WEEK

Monday: Earnings report from Ford (after market closes).

Tuesday: S&P Case-Shiller home price index (20 cities) and job openings reports for September, consumer confidence October, and earnings reports from McDonald’s, Pfizer (before market opens), Alphabet, AMD, Chipotle, Reddit, and Snap (after market closes).

Wednesday: GDP third quarter report, pending home sales and advanced U.S. trade balance in goods, retail inventories and wholesale inventories reports for September, ADP employment report for October, and earnings reports from Biogen, Eli Lilly (before market opens), Meta, Microsoft and Starbucks (after market opens).

Thursday: U.S. employment cost index report for third quarter, personal consumption expenditure (PCE) index, core PCE index, and Chicago PMI reports for October, initial jobless claims for week ending on October 26, and earnings reports from Bristol Myers Squibb, Comcast, Merck, Peloton, Uber (before market opens), Amazon, Apple and Intel (after market closes).

Friday: Construction spending report for September, S&P final U.S. manufacturing PMI, ISM manufacturing, auto sales, and U.S. employment and unemployment rate reports for October, and earnings reports from Chevron, Exxon Mobil (before market opens).