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JUNE 16, 2023

BLACKROCK’S BITCOIN ETF

BlackRock has filed documents with the Securities and Exchange Commission (SEC) to launch the first publicly traded Bitcoin exchange-traded fund (ETF) in the U.S. The proposed ETF, known as “iShares Bitcoin Trust,” will be listed on Nasdaq if approved, with Coinbase Custody Trust Co. serving as the custodian. This ETF could be seen as a significant endorsement of the digital currency, potentially attracting substantial institutional investment, however, there are concerns within the crypto industry that the involvement of traditional finance players like BlackRock may be part of an effort to control and undermine the crypto industry. Moreover, although the SEC has previously approved Bitcoin futures-based ETFs, the involvement of Coinbase as the custodian in BlackRock’s application adds uncertainty to the SEC’s decision regarding this ETF.

WALLER’S PERSPECTIVE

Federal Reserve Governor Christopher Waller recently stated that recent banking strains in the U.S. may not lead to significantly tighter lending conditions. He emphasized the importance of not allowing concerns about a few lenders to interfere with the Fed’s fight against inflation. Waller firmly supported raising interest rates to combat inflation and stated that he does not advocate changing monetary policy based on worries about ineffective management at few banks.

FED’S ACTIONS QUESTIONED

Former Treasury Secretary Lawrence Summers recently commented on the Federal Reserve’s latest actions, stating that he found them to be confusing as while there were valid reasons not to increase interest rates, the Fed simultaneously added two predicted rate hikes for the year and raised their growth forecast, creating inconsistency in their actions. Summers noted that the internal politics of the Fed may have influenced their decision, which is concerning. He believes that the Fed should continue to move towards restraint in their policy since there is no clear evidence of inflation slowing down.

GLOBAL STOCKS SURGE

Global stocks have reached their highest levels in 14 months, as investors have begun to believe that the Federal Reserve may no longer need to continue raising interest rates. The recent central bank decisions made by the Fed, the European Central Bank (ECB), and the Bank of Japan (BOJ) have been as the market had expected, with no changes in rates by the Fed and BOJ, and a quarter-point rise by the ECB.

INTERNATIONAL NEWS

According to Pierre Wunsch, a member of the Governing Council, the European Central Bank (ECB) may raise interest rates beyond September if core inflation does not decrease sustainably. Wunsch, who is also the chief of the National Bank of Belgium, stated that if the basic measure of price increases, which excludes food and energy, continues to stay at 5% yearly, interest rates would need to keep increasing. Moreover, Bundesbank’s President, Joachim Nagel, also suggested interest rates may need to keep rising after the summer break. While ECB’s President, Christine Lagarde, has not provided clear guidance, markets are already predicting another interest rate hike due to a slight increase in quarterly inflation projections.

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