SEC Delays Approval of Bitcoin Exchange Fund; Gas Prices Continue Climb

CryptoCorner

The U.S. Securities and Exchange Commission (SEC) delayed completion of its review of SkyBridge Capital's application for a Bitcoin exchange traded fund to late August.

SkyBridge Capital, a $7 billion alternative investment fund headed by Anthony Scaramucci, filed an application May 6 to launch and trade shares of the First Trust Bitcoin ETF Trust and hoped for approval within the 45-day review period.

"The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider . . . the comments received," J. Matthew DeLesDernier, SEC Assistant Secretary, said in a letter posted on the Federal agency's website. "Accordingly . . . the Commission designates August 25, 2021, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change."

The proposed ETF would allow retail investors to invest in Bitcoin without direct ownership of the asset. So far, the SEC has been reluctant to approve a Bitcoin ETF and some speculate it won't because the crypto is too volatile.

But that hasn't killed interest in Bitcoin.

Former White House Communications Director Anthony Scaramucci
"I'm not a Bitcoin evangelist, but I'm a Bitcoin investor," Anthony Scaramucci said. In the photo, he attends The Hollywood Reporter's Most Powerful People In Media 2018 at The Pool on April 12, 2018 in New York City. Ben Gabbe/Getty Images

The Federal Reserve, the nation's central bank, has kept interest rates low to support the recovery as the economy emerges from the COVID-19 shutdown. Low interest rates have crushed small savers. In most cases, a savings account at a commercial bank doesn't keep pace with inflation.

Bonds are safe, but yields are low.

The Fed has printed great billowy clouds of money and increased government spending has raised inflation fears.Some investors therefore have turned to Bitcoin in search of returns despite its volatility.

Bitcoin was up about 90% for the year when Scaramucci announced plans for the EFT in March. The crypto later reached an all-time high, but recently lost about half its peak value before rallying.

Others have sought to launch a Bitcoin ETF, including WisdomTree Investments, NYDIG, VanEck and Valkyrie Digital Assets.

But so far, the SEC has been reluctant to approve Bitcoin ETFs due to the cryptocurrency's wild price swings, lack of oversight and the possibility of market manipulation.

However, two Bitcoin ETFs trade on the Toronto Stock Exchange. Bloomberg reported that ETFs tracking the crypto market have been launched in Europe, and their market value exceeded 1 billion euros in 2020.

Skybridge's proposed minimum investment in its proposed EFT is $50,000. The minimum additional investment is $25,000, but the requirement can be waived in some cases. The proposed management fee is 0.75% per year.

"The partnership's investment strategy is designed to provide exposure to Bitcoin, the largest and most liquid digital asset through an institutional-grade fund," SkyBridge Capital said in its offering note. "The partnership's investment program is speculative and entails substantial risks."

SkyBridge Capital said it plans to list the ETF shares on New York Stock Exchange's Arca, an all-electronic operation that specializes in exchange-traded listings and dominates the market.

An ETF tracks an index, commodity, sector or other asset such as cryptocurrency. The fund can be purchased or sold on a stock exchange like the shares of any publicly traded company. The strategy can include the purchase of a range of stocks in a sector to spread the risk, but ETFs also can be tailored to commodities using varying investment strategies.

ETFs are often used in building a retirement portfolio. In what's believed to be a first, Guinness Atkinson recently completed the conversion of two mutual funds to ETFs.

SkyBridge also manages a Bitcoin fund that invests exclusively in the crypto. The fund warns that investors could lose "all or a substantial portion of their investment."

In February, Scaramucci told Yahoo Finance that Bitcoin would reach $100,000 within 12 months. He stands by his estimate.

"I'm not a Bitcoin evangelist, but I'm a Bitcoin investor," he said.

Scaramucci is perhaps best known outside Wall Street for his 10-day stint as former President Donald Trump's communications director. He has since become a harsh critic of the former president.

Bitcoin and the stock markets took a hit Thursday as investors looked for safety amid fears of a COVID variant and a possible worldwide slowdown in the recovery from the pandemic.

The Dow Jones Industrial Average, S&P 500, Nasdaq and Russell 2000 were down in mid-day trading.

Japan declared a state of emergency in Tokyo, site of the Summer Olympics, citing a possible rebound in coronavirus infections, and banned spectators from the events. The decision appeared to give the markets a fresh case of the jitters and ended Bitcoin's modest rally. Ethereum and other cryptos also fell.

In mid-day trading Thursday, Bitcoin changed hands at $32,831.64, down 4.94% in the last 24 hours but up 12.62% for the year. The 24-hour range is $32,114.78 to $34,779.41 The all-time high is $64,829.14. The current market cap is $615.60 billion, CoinDesk reported.

Market Pulse

Gasoline prices have jumped about 40% since the first of the year and are likely to go higher.

0115_gas_oil_prices
The average price for a gallon of regular gasoline is $3.13, up from $2.25 on January 1, the American Automobile Association said. Mario Anzuoni/Reuters

The average price for a gallon of regular gasoline is $3.13, up from $2.25 on January 1, the American Automobile Association said.

Prices could increase an additional 10 to 20 cents a gallon through the end of August.

The nation's highest average price was $4.11 a gallon on July 17, 2008, AAA said.

West Texas Intermediate Crude, the benchmark for U.S. oil prices, recently topped $75 a barrel – the highest since November 2014.

Demand has surged as the economy reopened, sending prices higher.

Higher fuel costs ripple through the economy, sending production and consumer prices higher for anything delivered by truck or train and stoking inflation.

Between May 2020 and May 2021, the index of Personal Consumption Expenditures (PCE) rose 3.9% and the Consumer Price Index (CPI) increased 5%.

Gasoline supplies are in good shape and spot shortages appear unlikely.

The U.S. Energy Information Administration (EIA) said demand is 9.1 million barrels a day. Last week, gasoline stocks increased by 1.5 million barrels to 241 million barrels.

Crude oil represents 52% of the cost of a gallon of gasoline; refining, 19%; taxes 16%; distribution and marketing 14%, the federal agency said.

Tropical Storm Elsa made landfall on the Florida Gulf Coast north of Tampa. It missed the refineries on the Texas Gulf Coast and therefore won't disrupt production.

The storm is expected to move up the East Coast and bring heavy rain to New York by Friday.

The Organization of Petroleum Exporting Countries (OPEC) hasn't reached an agreement that could increase production by as much as 500,000 barrels a day in August.

Earlier this week, White House Press Secretary Jen Psaki said the U.S. has spoken to OPEC members and urged them to strike a deal.

An increase in production would expand supply and slow price increases.

"In the coming months, we expect global oil production to catch up with the increases we've seen in demand in 2021," Stephen Nalley, EIA Acting Administrator, said in a press release.

"U.S. and global oil producers are increasing their production, which should help moderate oil prices that have increased significantly as global economic concerns about the COVID-19 pandemic have begun to ease."

AAA said the 10 states reporting the largest increase in prices at the pump this week are: Idaho (+10 cents), Alaska (+9 cents), Washington (+7 cents), Oregon (+7 cents), Colorado (+7 cents), Ohio (+6 cents), Utah (+6 cents), Wyoming (+6 cents), Nevada (+5 cents) and Montana (+5 cents).

The ten states with the lowest average prices are: Mississippi ($2.75), Louisiana ($2.76), Texas ($2.80), Missouri ($2.80), South Carolina ($2.81), Alabama ($2.81), Arkansas ($2.82), Oklahoma ($2.83), Kansas ($2.87) and Tennessee ($2.88).

On Wednesday, prices in California averaged $4.30 a gallon.

The Lundberg Survey called California the "poster-boy for the demand-ravaging retail price climb."