Shares of New York-listed cryptocurrency companies surged on Monday following Donald Trump’s endorsement of bitcoin and his promise of more favourable regulations if elected.
Coinbase shares climbed 3.7%, while Bitfarms, Riot Platforms, and CleanSpark saw gains ranging from 3.4% to 4.5%. Analysts at Bernstein noted that the crypto market is optimistic about a potential Trump victory, especially compared to the current Biden administration’s stricter regulatory stance.
Crypto executives have frequently criticised the Biden administration’s oversight, although SEC Chair Gary Gensler defends it due to bitcoin’s volatility and speculative nature. Despite these regulatory hurdles, cryptocurrency has gained mainstream acceptance, with support from institutional investors and ETFs linked to bitcoin and ether prices.
Why does it matter?
A Trump victory could provide a further boost to the industry. He recently suggested creating a national bitcoin stockpile and expressed interest in mining all remaining bitcoin in the US. Bitcoin rose by up to 2.4%, hitting its highest level since mid-June.
The State of Michigan Retirement System’s recent $6.6 million investment in the ARK 21Shares Bitcoin ETF (ARKB.Z) marks a significant step in the institutional adoption of cryptocurrency assets. Managing approximately $143.9 million in total assets for state employees, Michigan’s decision reflects a growing acceptance of digital assets among institutional investors.
The move aligns with a broader trend of diversification within pension fund portfolios, highlighting a shift towards incorporating digital assets into traditional investment strategies. Similarly, the State of Wisconsin Investment Board recently disclosed significant cryptocurrency holdings, including investments in BlackRock’s iShares Bitcoin Trust and the Grayscale Bitcoin Trust.
The influx of institutional capital into Bitcoin ETFs could help stabilise the often volatile cryptocurrency market. Analysts, including Todd Sohn from Strategas, suggest that institutions’ longer investment horizons can mitigate extreme price fluctuations that Bitcoin has historically experienced. As more institutional investors, including public pension funds, allocate capital to Bitcoin ETFs, the overall market dynamics could evolve, fostering a more stable environment for cryptocurrencies. These investments signify a significant shift towards cryptocurrency among public pension funds, traditionally driven by retail investors.
Additionally, the mayor of Jersey City, New Jersey, has indicated plans to allocate a portion of the city’s pension fund to Bitcoin ETFs. Although specific timelines have yet to be announced, this further underscores the trend of public pension funds considering cryptocurrency as a viable investment option. These actions signal the growing legitimacy and acceptance of cryptocurrencies in mainstream finance. As institutional interest grows, stakeholders will closely monitor these developments, potentially paving the way for increased stability and broader acceptance of cryptocurrencies.
Amazon.com is pushing forward with the development of its own AI chips, aiming to reduce its dependence on Nvidia and lower costs for its customers. Engineers in Amazon’s Austin, Texas, chip lab are currently testing a new server design packed with these proprietary AI chips. Rami Sinno, director of engineering for Amazon’s Annapurna Labs, highlighted the increasing demand for more affordable alternatives to Nvidia’s products.
Amazon acquired Annapurna Labs in 2015 and has since focused on creating processors that can handle complex calculations and large data sets more economically. As competitors like Microsoft and Alphabet also develop their own AI processors, Amazon’s initiative is a strategic move to maintain its edge in the AI cloud business, which is the main growth driver for Amazon Web Services (AWS).
Amazon’s new AI tools are also part of its broader strategy to tackle misinformation and enhance service offerings. This development comes as Nvidia adapts to tightening US export controls by creating China-specific AI chips.
Milan prosecutors are investigating an Italian unit of Amazon for suspected tax evasion. This new inquiry is separate from the recent multi-million euro seizure from another Amazon unit. Earlier this week, Italy’s tax police seized €121 million from Amazon as part of a different investigation into tax fraud and illegal labour practices.
The current investigation in Italy began in 2021 following routine checks by tax police in an area north of Milan. It focuses on tax rules concerning the trading of goods within Italy and internationally, particularly value added taxes and customs duties. The potential size of the tax evasion has not yet been determined.
Over the past few years, Italian tax authorities and tax police in Monza, near Milan, have been conducting checks on Amazon’s accounts in Italy. Amazon has not yet commented on the ongoing investigation.
Authorities are scrutinising Amazon’s compliance with tax regulations as part of their broader efforts to tackle tax evasion. This investigation highlights the increasing focus on multinational companies’ tax practices in Italy.
Turkey is set to launch a $5 billion package to boost annual electric vehicle (EV) production to one million cars. President Tayyip Erdogan announced that the country has paved the way for investments from major EV producers, including a $1 billion production plant by China’s BYD. The initiative aims to establish Turkey as a significant player in the EV market.
In addition to the EV sector, Erdogan revealed plans for a $5 billion investment to build a semiconductor chip factory. This effort is part of a broader strategy to enhance Turkey’s capabilities in high-tech manufacturing. The government also aims to become a regional hub for battery production, with a goal of building an 80 gigawatt-hour capacity by 2030, backed by a $4.5 billion incentive package.
Further support will be provided for renewable energy sectors. Erdogan announced $2.5 billion in grants for solar cell facilities with a capacity of up to 15 gigawatts. Another $1.7 billion has been allocated for manufacturing critical components in the wind energy sector. These initiatives are part of Turkey’s plan to diversify its energy sources and reduce reliance on imports.
Erdogan expects these incentives to attract at least $20 billion in private sector investments. The government will be unveiling further details of these high-tech incentives soon, as it continues to position Turkey as a leading player in various advanced technology industries.
Speaking at the Bitcoin 2024 conference, Donald Trump emphasised the importance of the US leading in cryptocurrency, warning that failure to do so would allow China to dominate. He highlighted his plan to create a national ‘stockpile’ of bitcoin and establish a crypto advisory council if elected. Despite previously criticising cryptocurrency, Trump now promotes expanding US bitcoin mining.
Trump’s stance contrasts with that of Democrats, who he claims seek stricter regulation of the crypto sector. He criticised current regulatory actions and suggested that a strategic bitcoin reserve would legitimise digital currencies. The response from the crypto community has been mixed, with some seeing his proposals as a positive step.
Trump also reiterated his intent to commute Ross Ulbricht’s life sentence, creator of the Silk Road marketplace, sparking applause at the event. Meanwhile, some Democratic lawmakers are urging their party to adopt a more progressive approach to digital assets, recognising the growing influence of crypto enthusiasts in politics.
Why does this matter?
The change in Trump’s stance comes as global concerns about cryptocurrencies’ potential risks persist, including their impact on financial systems and susceptibility to crime. Despite these challenges, Trump’s advocacy for cryptocurrency reflects its emerging role in political discourse.
Microsoft investors are keenly awaiting Tuesday’s earnings report, focusing on whether the Azure cloud-computing business has shown sufficient growth to justify the massive investment in AI infrastructure. With Microsoft being a leader in monetising AI through its collaboration with ChatGPT creator OpenAI, Azure’s growth is expected to remain steady at around 31% from April to June, aligning with forecasts. However, investors are looking for a more significant boost from AI contributions in the fiscal fourth quarter, following its 7% contribution to Azure’s growth in the prior quarter.
Microsoft’s capital spending is projected to have surged by 53% year-over-year to $13.64 billion, up from $10.95 billion in the previous quarter. Concerns over high spending on data centres with short-term gains have affected the US stock market, particularly after Alphabet’s recent report of capital expenditures exceeding estimates and only modest revenue boosts from AI integrations, causing a selloff in major tech stocks. Analysts emphasise the importance of Microsoft’s ability to accelerate AI-related revenue growth to meet investor expectations and justify continued high capital expenditures.
The increased spending has enabled Microsoft to attract more enterprise clients by expanding its AI cloud services and introducing features like the 365 Copilot assistant for Word and Excel. Despite half of the Fortune 500 companies using the $30-per-month Copilot service, Microsoft still needs to disclose its revenue contribution. Analysts expect the impact of Copilot to be more evident in the latter half of 2024. The company’s strategic focus on enterprise AI applications positions it well to capitalise on its extensive client base.
Microsoft shares have risen about 13% this year, adding over $350 billion to its market value, though the stock has recently dipped by nearly 9% amid a tech selloff. The company is expected to report a 14.6% increase in overall revenue for the April-June period, a slowdown from the 17% growth in the previous quarter, primarily due to slower growth in its personal computing segment, which includes Windows and Xbox. The productivity segment, which houses Office apps, LinkedIn, and 365 Copilot, is anticipated to grow by about 10%.
LinkedIn has agreed to a $6.625 million settlement to resolve a proposed class action accusing the company of inflating ad metrics, leading to overcharges for advertisers. The preliminary settlement, filed in San Jose, California federal court, awaits approval by US Magistrate Judge Susan van Keulen. Although LinkedIn denies any wrongdoing, it has committed to hiring an outside auditor for two years to review its ad metrics.
The lawsuit originated from allegations by advertisers, including TopDevz of Sacramento and Noirefy of Chicago, who claimed LinkedIn counted video ad views even when the videos played off-screen as users scrolled past. This issue came to light after LinkedIn disclosed in November 2020 that software bugs had led to over 418,000 overcharges, mostly under $25. LinkedIn subsequently provided credits to nearly all affected advertisers.
The settlement covers US advertisers who purchased ads on LinkedIn from January 2015 to May 2023. LinkedIn stated that the settlement underscores its commitment to ad integrity and maintaining a trusted platform for users and customers. The advertisers’ lawyers may seek up to 25% of the settlement amount, approximately $1.656 million, for legal fees.
Judge van Keulen had previously dismissed the lawsuit in December 2021, but the advertisers appealed, and the appeal was put on hold for mediation. The case, known as In re LinkedIn Advertising Metrics Litigation, is being handled in the US District Court, Northern District of California.
The launch of spot Ether exchange-traded funds (ETFs) in the US on 23 July 2024 marked a significant milestone. On their first day, Ether ETFs attracted about $106 million in net inflows, with BlackRock iShares Ethereum Trust leading at $266.5 million. However, these figures are modest compared to the nearly $7 billion inflows seen by Bitcoin ETFs in their first three weeks. Analysts predict Ether ETFs may capture only 20-25% of Bitcoin ETF inflows, with some estimates as low as 10%, reflecting market complexities and investor sentiment.
Investor reactions to the ether ETF launch are varied, with many experts expressing cautious optimism. Nathan Gauvin, CEO of Gray Digital, suggests that the launch might not have the transformative impact some anticipated, describing it as ‘less of an event than people are making it seem to be.’
A significant concern among investors is the US Securities and Exchange Commission’s decision to exclude staking from these ETFs. Staking allows Ethereum holders to earn rewards by locking up their ether, enhancing potential returns. The current ETF structure only permits holding unstaked ether, leading some investors to compare this to owning a bond without receiving interest payments. Chanchal Samadder from ETC Group echoed this sentiment, likening holding an unstaked ether ETF to owning a stock without the right to dividends.
Why does this matter?
The exclusion of staking options is a major point of contention within the industry. Many experts, including CoinShares’ Steven McClurg, believe that investors may continue to stake their ether outside the ETF framework to earn yields, potentially diminishing the attractiveness of the ETFs. This situation highlights the challenges of regulatory constraints and the need for a more comprehensive approach to integrating staking into these investment vehicles.
Elon Musk announced plans to discuss a $5 billion investment in his AI startup, xAI, with Tesla’s board. This potential move, preceded by a poll launched on social medial platform X, has sparked concerns about a conflict of interest, as Musk launched xAI to compete with Microsoft-backed OpenAI. A recent social media poll showed strong public support for the investment, with over two-thirds of respondents in favor.
Tesla recently reported lower-than-expected second-quarter results, with declining automotive gross margins and profits. Musk highlighted the potential benefits of integrating xAI’s technologies with Tesla, including advancements in full self-driving and new data centre development. However, critics argue that the investment might not be in the best interest of Tesla shareholders.
xAI, launched by Musk last year, has already raised $6 billion in funding, attracting major investors such as Andreessen Horowitz and Sequoia Capital. Despite Musk’s ambitious plans for xAI, his past ventures have faced scrutiny over conflicts of interest, including the controversial acquisition of SolarCity by Tesla in 2016.
