The Crypto Market Just Scored a Major Victory

The U.S. Securities and Exchange Commission ("SEC") rarely loses a case.

It won 80% of the cases that went to trial last year. But its latest decision to block the Grayscale Bitcoin Trust ("GBTC") exchange-traded fund ("ETF") was overturned a few months ago. And it's not fighting the ruling.

Let's dive into the details...

Headline No. 1:

A bitcoin (BTC) ETF could become a reality sooner than expected.

McCall's Call: The District of Columbia Court of Appeals ruled against the SEC in August – calling its decision against the GBTC "arbitrary and capricious." The SEC had until last week to challenge that decision, but in a shocking turn of events, it didn't...

If you haven't followed this story closely, let's briefly rewind...

Grayscale Investments applied to the SEC to change the structure of its popular bitcoin Trust from a closed-end fund (that's actively managed) to an ETF (that tracks the performance of an index or security). Due to its current structure, the GBTC frequently trades at a discount to its assets (bitcoin). By converting it to an ETF, the trust will trade closer to the value of the crypto.

The SEC initially slapped down the application – stating that bitcoin trading platforms lacked the necessary tools to detect fraud and other problems.

But that criticism didn't hold up in the appeals court. Three judges unanimously ruled that Grayscale was on the right side of this argument. And as I mentioned above, the SEC chose to let that decision go.

This is a surprising defeat and rollover by the SEC. And it could also be an early sign that cryptocurrency ETFs are coming to the market soon.

Of course, the government could still find another reason to object to Grayscale's application. But other major financial institutions including BlackRock (BLK), Fidelity Investments, and Invesco (IVZ) have also filed to launch bitcoin ETFs.

This is good news for cryptocurrencies – particularly bitcoin.

If these ETFs are permitted, folks will have many more options to invest in cryptos. And some of the world's top asset managers could funnel billions of dollars into these funds without having to buy or hold crypto directly.

As you can see below, bitcoin has been stuck in a sideways range since about March – trading between $25,000 and $32,000. But this news could be what the crypto needs to break out.

Bitcoin won't stay quiet forever. It often makes sharp moves after long periods of dull trading.

And overall, I'm bullish on cryptos long term.

So keep bitcoin and GBTC on your radar. I want to see how they trade early this week. If they can start to move higher again, it could signal the start of a new rally in the sector. I'll keep you updated right here in Daily Insight.

Headline No. 2:

The Federal Reserve Bank of Chicago president said an inflation slowdown is "undeniable."

McCall's Call: It's not often that I agree with someone from the Fed. But Chicago Fed President Austan Goolsbee made some comments recently that sound very similar to what I've been saying here for months...

In short, Goolsbee said that the downward trend in inflation – which took the Consumer Price Index ("CPI") from a 9% year-over-year increase in June 2022 to 3.7% this September – is not a blip.

The CPI has slowed in 12 of the past 15 months. And while the year-over-year change has increased recently, I don't believe that means inflation is resuming an upward trend.

When inflation really began to pick up between 2020 and 2022, we saw multiple instances where the year-over-year change dipped. But then it took off again. So we'd need to see a more sustained increase before I'd argue that inflation is coming back.

And clearly, Goolsbee agrees.

Here's another thing to keep in mind... Last week, I wrote about shelter inflation – which makes up one-third of the CPI and has an outsized effect on the overall inflation number. That figure is about to go into freefall. And when it does, it'll pull the entire inflation number down with it.

Now, we're still not back to normal inflation levels yet. It's still well above pre-pandemic levels, and it will take time for it to come back down to earth.

But as I've been saying for months now, we're on the right path.

The Fed is starting to see that, too. And that means they can stop hiking rates. The 5.25% increase over the past two years has already had a huge impact on the economy – from mortgage rates to credit-card interest and even lending rates.

But more importantly, the economy hasn't felt the full effect of those rate hikes yet. So even with a "pause" in the current cycle, the impact of the already announced hikes will continue to put downward pressure on inflation.

And that's good news for investors.

Here's to the future,

Matt McCall
Editor, Daily Insight
October 16, 2023

Did You Miss My Latest Podcast?

There's a lot of fear and negativity in the air these days. Between geopolitical unrest, inflation, and a volatile market, it feels like things will only get worse from here. That's why on this episode of Making Money With Matt McCall, I welcome Grant Williams to the show to shed some light on the big-picture view of the world and the stock market.

Grant and I jump right into a discussion of the bond market. The yield on the 10-year Treasury recently hit a decade high. Folks are fearful that inflation will remain elevated for longer than previously anticipated and that the Federal Reserve will raise rates at least one more time before the end of the year. But Grant explains that interest rates have broken a four-decadelong downtrend. And that could be a major shift in how the economy and stock market perform in the next decade. Tune in for all the details.