Bitcoin Gets Serious

All three major indices posted gains for the week, boosted by the earnings bug. Stocks have risen in recent days after strong earnings results from some of the biggest U.S. corporations. Most S&P 500 companies that have reported earnings have beat analysts’ expectations. Corporate profits are expected to jump around 35% in the latest quarter from the prior year, according to Refinitiv data. Financial results from value stocks have shown that corporate executives have been able to ‘insulate’ themselves from the global supply-chain crisis…and deliver strong results. Some companies have been passing down higher prices to customers. The blue-chip-gauge, (The Dow Jones Average Industrial Average), added 74 points or 0.2%, to 35677, its first high since August. The S&P 500 lost 4.88 points or 0.1% to 4544, snapping a seven-session winning streak. The technology-heavy Nasdaq Composite lost 125 points or 0.8% to 15090. “It’s still a solid backdrop for the stock market,” said Gabriela Santos, global market strategist at JPMorgan Asset Management. Investors have piled into bitcoin, sending prices to a high this week after the first bitcoin ETF started trading, (more later). Oil prices have kept soaring. Brent crude oil has jumped for nine consecutive weeks–the longest winning streak since 1999–to $85.53 on Friday, (10-22-21), near its high of the year. “When you look at the overall index, you think things are all calm,” said Brian Bost, co-head of equity derivatives in the Americas at Barclays. “The reality is there’s a lot of volatility.”

The debut of exchange-traded funds based on Bitcoin futures ‘could’ help crypto break into the…’mainstream.’ Is it good for investors? Bitcoin, the largest cryptocurrency, blew past its record high this past week, reaching new heights around $67.000, up 50% since September 30. Some bulls see a clear path to…$100,000. Just weeks ago Bitcoin was in the doghouse–hit by regulatory fears in the U.S., a severe crackdown in China, (and ultimately being closed down), and mounting criticism over the carbon footprint of “miners,” that process transactions and add new coins to the supply. Fears, doubts, and uncertainty in the crypto community have been swept away, ‘or under the rug,’ as excitement brews over a new ‘milestone: Bitcoin is cracking one of Wall Street’s favorite products, exchange–traded funds, opening a channel into a market worth $9 trillion. After years of false starts, a Bitcoin futures-based ETF, the ProShares Bitcoin Strategy (ticker, BITO) debuted on Tuesday (10-19-21), on the New York Stock Exchange. It racked up a record $1.1 billion in assets in two days. Another futures ETF, the Valkyrie Bitcoin Strategy launched on the Nasdaq on Friday. Other futures ETF’s could win approval soon. The flurry of futures ETF’s may be a ‘turning point’ for Bitcoin. With love/hate feelings aside, Bitcoin and Wall Street are converging for mutual gain. “With a $2 trillion market value and 200 million users, the digital asset universe is too large to ignore,” observed Alkesh Shah, head of crypto strategy at Bank of America, in a recent coverage of the recent launch of crypto. Venture Capital poured $17 billion into digital assets through the first half of the year, up from $5.5 billion in all of 2020, he noted. ETF’s could be the next stage of crypto’s ‘colonization.’ Wall Street is eager to sell, trade and create derivatives around the product, opening new revenue streams. Physical Bitcoin ETF’s aren’t expected to be approved soon by U.S. regulators. But the crypto markets are rising, on hopes that even futures based on ETFs are a big win for the industry, injecting crypto deeper into the financial ‘heartland.’

Oat Prices Have Surged to Record Highs, As Drought Hits Key Growing Regions. Oat futures have climbed to record highs, thanks to the severe dry conditions that have ‘parched’ growing regions including North Dakota and the Canadian Plains. At around $6.60 a bushel on Friday (10-15-21), oat futures are more than twice as expensive as they were last year and the year before. Much of that rise into record territory has come over the past three months while farmers harvested oats that were sewn earlier in 2021. Prices normally fall this time of year (October), as the new crop hits the market, according to analytics firm Gro Intelligence. But this year’s high prices for competing crops, such as wheat, corn, and soybeans prompted U.S. farmers to plant roughly 13% less acreage with oats, according to the U.S. Department of Agriculture data. Between that reduction and the dry weather, the agency expects the smallest oat crop on record. The hot weather has slashed farmers’ bushels grown per acre. In some locals, even the crop that grew failed to produce, pushing farmers to abandon oats or cut it as feed for livestock, said Clair Keene, an extension agronomist at North Dakota State University. “There is an average number of oat acres planted in 2021, but fewer acres harvested,” Dr. Keene said. The meager oat crop could hit milk makers, bakers, breakfast eaters and farmers who need oats to cook or feed livestock and poultry. “Supplies will be tight,” said Jack Scoville, a grains analyst with Chicago trading firm Price Futures Group. Some analysts expect oat production to rebound with improving weather, but say that could take a while. “The situation is pretty tight and won’t loosen up for at least a year,” Mr. Scoville said.


Norm Conley, CEO and chief investment officer of JAG Capital Management in St Louis, Barron’s “There is still some lingering Covid effect; we’re seeing it in the continuing supply-chain issues, Mr. Conley. “But those should abate over time. You’ve got a healthy consumer. The trajectory is broadly positive for the economy. All of us in the investing world are trying to suss out the difference between transitory, Covid-led spikes in revenue or subscribers and those that are more durable and permanent.” says JAG’s Conley.

C.T. Fitzpatrick, CEO and CIO of Birmingham, Alabama-based Vulcan Value Partners, Barron’s Mr. Fitzpatrick noted that the pandemic greatly strengthened some companies, while severely weakening others, “The world has changed because of Covid,” he says. “Some companies flipped to profitability or saw an inflection in their businesses earlier than expected. Others that were perhaps already struggling really had it handed to them.”

Matt Hougan, CIO, Bitwise, Batton’s “We’ll eventually get physical Bitcoin and Ether ETFs, and crypto will be a fully normalized asset.”

Ben Johson, head of ETF research at Morningstar, Barron’s “What you see Wall Street doing with these ETFs is sucking Bitcoin in with its tractor beam.”