Joe Biden has officially taken office as the 46th president of the United States. This marks the first time since 2009 that Democrats have held the executive branch and both chambers of congress. Newly nominated SEC chair, Gary Gensler, is a long-time digital currency advocate and is expected to facilitate adoption of cryptocurrencies. The nominee for US Treasury Secretary, Janet Yellen, has taken a more cautious approach towards Bitcoin, issuing verbal statements indicating she may support greater regulation. However, Yellen also issued a written statement which indicated optimism around the use cases of blockchain. BlackRock has continued wading into Bitcoin exposure, with a recent filing allowing certain funds to invest in Bitcoin futures. As well, MicroStrategy has made yet another Bitcoin purchase.
What Does The Biden Transition Mean For The Economy?
- President Joe Biden has officially taken office, and is already taking steps to redirect the U.S. economy. His immediate goals are related to battling COVID-19 and the associated economic fallout. Biden has proposed a $1.9 trillion dollar relief bill to congress. Although this bill may face resistance from Republicans, it will likely pass due to the Democratic majority in both chambers of congress. This bill primarily gives money to those who are most affected by lockdowns, including direct payments to qualified citizens and increased unemployment benefits. The bill also allocates funds to facilitate the COVID-19 vaccine rollout, which is being hampered by constrained supply. Janet Yellen has stated that Biden “will not sign any new free trade agreements before the US makes major investments in American workers and our infrastructure”, adding “Our economic recovery at home must be our top priority.”
Gary Gensler and BlackRock
- Gary Gensler has been nominated as the Chair of the SEC by President Biden. Although Gensler was formerly a banker with Goldman Sachs, he is known to be a decisive regulator, and is expected to increase regulation on Wall Street. Conversely, Gensler is very optimistic about digital assets, having spent his time at MIT researching and teaching about blockchain and digital currencies. Gensler’s term has created speculation that the first SEC-approved Bitcoin ETF could be created in the near future. Relatedly, BlackRock has paved the way for two of its funds, the Strategic Income Opportunities Fund and the Global Allocation Fund, to invest in cash-settled bitcoin futures. The two funds have $36 billion and $26 billion in AUM, respectively. Bitcoin futures would represent a significant step for the world’s largest asset manager, which currently only has indirect Bitcoin exposure through portfolio companies.
MicroStrategy and GBTC Premium Consolidation
- MicroStrategy has made yet another Bitcoin purchase, as CEO Michael Saylor reiterates his optimism about the currency. The relatively small transaction of $10 million adds to the company’s total Bitcoin holdings, which are worth approximately $2.3 billion. In addition, GBTC saw its premium on Bitcoin exposure shrink rapidly from 40% to 3%, relative to the fund’s NAV. This consolidation magnified losses for investors significantly, and continues to add an additional layer of volatility on top of the underlying price of Bitcoin. GBTC investors continue paying an annual management fee in exchange for holding the exposure vehicle.
The new administration is likely to exacerbate the loose fiscal and monetary policy the United States has seen in recent quarters. Key officials have already started forming opinions on cryptocurrencies, and digital asset regulation is likely to experience significant developments during this presidential term. Institutional investors continue to add Bitcoin to their balance sheets, and Blackrock has initiated the process for the firm to gain greater exposure to Bitcoin.