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Bitcoin goes to Wall Street. What now?

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A new era of crypto trading is expected to begin as early as today, after the SEC finally approved the creation of new exchange-traded funds that will allow investors to more easily buy and sell Bitcoin.

The regulator yesterday authorized eleven fund managers – including Wall Street fund giants BlackRock and VanEck and smaller firms such as GrayScale and Valkyrie – to offer the new crypto investment products.

The companies have been awaiting the decision aggressively cutting their management fees to gain an early advantage. “The fundamental change is that there’s a lot more money coming into this asset class,” Paul Grewal, chief legal counsel at cryptocurrency exchange Coinbase, told DealBook. Matthew Sigel, head of digital asset research at VanEck, called it a “historic” moment.

Bitcoin hit a 21-month high this week, as crypto boosters shake off a series of high-profile bankruptcies and a sweeping legal crackdown on some of the industry’s biggest players. That said, the cryptocurrency’s price barely fell this morning, trading below $47,000, giving the digital token a market value of around $920 billion.

How big can the market become? Unsurprisingly, cryptocurrency buyers and those offering the Bitcoin ETFs think the potential is limitless. Grewal said investors could pour billions of dollars into the digital asset markets in the short term, and trillions of dollars over time.

But even some outside the industry see reason for growth. “We expect further price increases in the current year,” Deutsche Bank researchers Marion Laboure and Cassidy Ainsworth-Grace wrote in a letter to investors today. They added that a flood of institutional investors and expected new regulations for crypto trading also in the European Unioncould strengthen the digital asset market.

The SEC’s approval gives crypto a stamp of legitimacy. Gary Gensler, the chairman of the SEC and a frequent critic of the asset, said the new Bitcoin investment products would provide trusted investor protection. For example, fund providers will have to file public registration statements and periodic financial returns.

But he warned that the approval was not an endorsement. “Bitcoin is primarily a speculative, volatile asset that is also used for illicit activities, including ransomware, money laundering, sanctions evasion and terrorist financing,” he said in a statement. Cathie Houtone of Bitcoin’s most outspoken proponents, whose company received approval for a Bitcoin ETF yesterday, said Gensler had “disparaged” the sector.

Is an Ethereum Fund Next? The industry and its lobbyists in Washington believe that the approval of Bitcoin ETF will lead to similar funds for other cryptocurrencies. VanEck has a pending application for an ETF tied to Ethereum, the second-largest crypto asset by market capitalization.

Natural gas giants agree to combine. Chesapeake Energy said it would acquire Southwestern Energy in an all-stock deal worth $7.4 billion, creating one of the nation’s largest energy producers. It’s the latest major problem in the oil and gas sector in recent months, even as lower oil prices weigh on the sector’s profits.

Tech giants announce a new wave of layoffs. Amazon said it would cut hundreds of jobs at Prime Video and studios, and more than a third of the workforce at streaming platform Twitch. And Google has cut hundreds of jobs as it looks to lower costs and double its use of artificial intelligence.

Chris Christie is dropping out of the presidential race. The outspoken anti-Trump candidate suspended his long-controversial campaign yesterday. But comments dismissing his Republican rivals who were caught on a hot mic — Christie said Nikki Haley was “going to get smoked” — appeared to undermine his efforts to stop Donald Trump. (Haley and Ron DeSantis traded barbs during another debate, while Trump participated in a town hall event on Fox News.)

Alaska Airlines is grounding Boeing’s 737 Max 9 aircraft. The company said it would not resume flights with the planes until at least Saturday. The airline was awaiting instructions on how to inspect its planes after the FAA said Tuesday that Boeing’s original rules needed to be revised.

Skydance Media is reportedly considering a bid for Shari Redstone’s National Amusements. Skydance CEO David Ellison is in talks with investors, including his father, Oracle founder Larry Ellison, about a cash offer for Paramount Global’s parent group, according to The Wall Street Journal. If successful, the group would reportedly look to combine Paramount with Skydance, the studio behind “Top Gun: Maverick.”

Heading into third-quarter earnings in early October, stocks were sputtering as investors worried about persistently high inflation and rising oil prices. They were surprised by a strong set of results that contributed to an impressive year-end rally for the S&P 500.

With fourth-quarter earnings announcements set to begin tomorrow – with Bank of America, BlackRock and JPMorgan Chase leading the way – Wall Street is hoping for an extension of those impressive gains. Here you can read what you should pay attention to.

Analysts predict slight growth. While the three months to December 31 are expected to post a second straight quarter of gains, annualized net growth is expected to be just 1.3 percent. according to FactSet. And that will largely come from just two sectors: technology and utilities.

Six technology giants were the biggest winners last quarter. According to Bank of America, Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia are expected to report a combined 56 percent year-over-year growth.

But with the global economy showing signs of slowing, few on Wall Street are predicting a repeat of Big Tech’s big stock gains in 2023. “Another year in which a select few mega-cap tech companies account for all of the stock market’s returns is completely off the table,” David Bahnsen, Chief Investment Officer at The Bahnsen Group, wrote to investors yesterday.

Doubts are creeping in about Apple. Last week, analysts from Barclays and Piper Sandler said has demoted the tech giant over concerns about slowing iPhone sales and questions about its operations in China.

It is a mixed picture for the banks. A rapid decline in Treasury yields last quarter was “a material positive” for lenders’ capital positions, Sean Ryan, FactSet’s vice president and director of banking and specialty finance, wrote in a research note.

But continued weakness in their investment banking operations and the uncertain corporate real estate market will put renewed pressure on profits, he added. Monitor updates on their lending activities, and especially on loan loss provisions, for signs of the health of households and the broader corporate sector.

— Vincent Clerk, the CEO of shipping giant AP Moller-Maersk. He warned in The Financial Times that attacks on commercial traffic by Iran-backed Houthi forces, which have forced some companies to divert ships around Africa, could damage global growth.

Disney already faces a number of challenges, including pressure from activist investor Nelson Peltz and questions about its business strategy and succession planning.

Now it faces a headache from ESPN, which generates much of its profits thanks to one of the sports network’s big new stars.

The fuss focuses on Pat McAfee, an NFL gambler turned shock jock whom ESPN poached in a deal from the gambling company FanDuel last year reportedly worth $85 million. (A personal pitch from Disney CEO Bob Iger apparently helped seal the deal.)

But McAfee holds an unusual position at ESPN: He is both an employee who appears on college football and NFL shows and, when it comes to his own daily show, a contractor. That means the network has less control over him, The Times’ Kevin Draper reports.

What happened: First, Aaron Rodgers, the New York Jets quarterback who regularly appears on McAfee’s show, suggested that late-night comedian Jimmy Kimmel — one of the biggest stars at Disney-owned ABC — had ties to Jeffrey Epstein. (Kimmel, whose name did not appear in recently released court records related to the deceased sex offender, has threatened to sue Rodgers.)

After publication by The New York Post unflattering rating data before McAfee’s show, the host then accused Norby Williamson, a senior ESPN executive, of leaking the information. McAfee called Williamson, long known as the network’s in-house talent discipline, a “rat.”

McAfee represents a dilemma for Disney. His public bickering with colleagues was highly unusual, as was Rodgers questioning another ABC star. “There is “no more offensive crime” on the network than “talent-on-talent” crime, said Jemele Hill, a former ESPN star. (McAfee has apologized for the episode involving Rodgers and the quarterback, who later said it was him a jokewill not appear on the show for the remainder of the NFL season.)

But Disney is betting that McAfee is a bridge to the future, given his following among younger sports fans. ESPN noted on January 5 that McAfee’s show had great success 886,000 average viewers per episode in December via its network, YouTube and TikTok, and is believed to lure Gen Z viewers to other shows.

Two caveats: On ESPN alone, McAfee is losing 48 percent of its lead-in audience, according to The New York Post. And ESPN only licenses McAfee’s show, meaning the network doesn’t get a cut of the revenue it collects from other platforms.

The entertainment giant has other concerns. In ESPN’s negotiations for NBA media rights, the league could push to show more games on ABC, meaning the two networks could be further integrated. But more controversy at ESPN could make that process fraught.

Offers

  • Shares of Hewlett Packard Enterprise fell nearly 9 percent after it announced a $14 billion deal Buy Juniper Networks, the supplier of communications equipment and services. (WSJ)

  • Advertising giant WPP is reportedly considering divesting its business 40 percent of the shares in Kantar, the market data company. (Bloomberg)

  • What’s next for Comcast? Brian Roberts, one of the biggest dealmakers in the media industry? (Puck)

Artificial intelligence

The best of the rest

  • ‘Is from America Ultra-processed diet So bad? The big food is fighting back.” (WSJ)

  • Nick Saban, one of the most successful coaches in college football history, is retiring from the University of Alabama. (the athletic)

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