Bitcoin temporarily reached new all-time highs this week. Jerome Powell’s concerns about inflation bolstered many investors’ desire to seek allocations in inflationary hedges. Public markets saw the IPO of a Bitcoin mining company and are eagerly awaiting news of GBTC’s plan to convert to an ETF. Private markets saw a notable acquisition by CBOE and a massive series B-1 for FTX, which included investments from major institutions including BlackRock.

Asset Buying Taper Looks Increasingly Certain

Jerome Powell expressed fresh concerns about the near-term inflation rates the United States may face. Powell noted that supply chains may face “more-persistent bottlenecks, and [thus] higher inflation.” Powell believes that “it is time to taper” asset repurchases, with the Fed expecting to reduce purchases by $15 billion per month, putting the program on pace to conclude by June of 2022. Although Powell stated that he doesn't believe it's time to raise interest rates, CME Group indicated a 75% probability of at least two rate hikes by the end of 2022. This projection is up from 20% one month prior. Jobless claims hit a new post-pandemic low of 290,000 last week and are nearing the 2019 average of 218,000. U.S. equities performed well last week, with the Nasdaq adding 0.6% and the S&P 500 reaching new all-time highs.

Public Markets Have New Bitcoin Exposure Vehicles

Bitcoin reached a new all-time high around $66,500 before pulling back to $63,000 at the time of writing. This price beat previous all-time highs from April by 3%, or approximately 0.25% after adjusting for inflation as defined by the CPI. Stronghold Digital Mining made its IPO last week in an offering that raised $115 million. Shares were up more than 50% on the initial trading day, putting the company’s valuation at $1.3 billion. Stronghold Digital Mining has seen a significant increase in valuation recently due to favorable Bitcoin mining economics. Grayscale has officially filed to convert GBTC from a trust to an ETF. If approved, this should minimize the volatility GBTC adds to Bitcoin price, making it a better exposure vehicle for most investors. The ProShares’ Bitcoin Strategy ETF began trading on October 19th and experienced over $1 billion in volume on its opening day.

CBOE and BlackRock Double Down on Bitcoin

CBOE acquired struggling cryptocurrency exchange ErisX. CBOE intends to leverage its connections to bring greater depth and volume to ErisX’s existing cryptocurrency spot and derivatives markets. CBOE previously entered the cryptocurrency derivatives market in 2017 before temporarily abandoning the business line. FTX raised a $421 million Series B-1, which included investments from BlackRock and Tiger Global. This round was raised at a valuation of $25 billion following 70% volume growth since the company’s $900 million Series B in July. Coinstar is launching a pilot program that will allow customers to buy Bitcoin at kiosks located inside 200 select Walmarts across the country. Houston’s $5 billion firefighter pension program allocated $25 million to Bitcoin and other cryptocurrencies. The allocation speaks to a more significant trend of asset managers finding use cases for Bitcoin, even amongst low-risk portfolios.

Market Recap

The past week was great for global Bitcoin markets. Inflation expectations continue driving demand for Bitcoin as an inflationary hedge. Major financial institutions continue making allocations to Bitcoin and finding new ways to offer investors Bitcoin exposure. Interest in Bitcoin mining is increasing in public markets as Bitcoin’s price increases have recently made the strategy extremely profitable.