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Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:
- The Senate questioned four Biden nominees up for agency roles. Crypto got a mention, albeit a small one.
- Crypto stock performance was mixed this week. We unpack why.
- We made it to the end of another busy week. Read on for our recap.
Senate seems poised to push Biden nominations through
Fortunately for the nominees, yesterday’s Senate Banking Committee confirmation hearings were largely uneventful.
SEC Commissioner Caroline Crenshaw, up for another term at the securities regulator, flew mostly under the radar. Committee members posed more questions to Christy Goldsmith Romero, President Biden’s pick to chair the Federal Deposit Insurance Corporation.
Kristin Johnson, put up to be an Assistant Secretary of the Treasury, and Gordon Ito, nominated to be a member of the Financial Stability Oversight Council, also faced questions Thursday.
Goldsmith Romero stands to take over the FDIC as the agency faces controversy. A May report uncovered allegations of sexual harassment and discrimination at the FDIC, raising questions about whether Chair Martin Gruenberg should continue in the role.
The nominee told Senators Thursday she plans for a “complete overhaul” of the agency should she be approved, including firing employees who have harassed or abused others and implementing a new system for registering complaints.
Somewhat surprisingly, the few crypto mentions were directed at Goldsmith Romero, not Crenshaw. During prepared remarks at the start of the hearing, Virginia Senator Mark Warner cited Goldsmith Romero’s track record of engaging with the crypto and AI industries.
“Having…a technology-based knowledge about how AI is going to change our systems and our banking regulations — and blockchain and the whole realm of digital assets — this is exactly the kind of experience we need at this troubled agency at this point,” Warner said.
Having support from Warner, a moderate Democrat, could prove invaluable to Goldsmith Romero, who has faced criticism from some Republicans who claim she is unqualified to lead the FDIC. Committee members on Thursday, however, seemed largely satisfied with her answers, so we expect she is feeling relieved.
Later on, long-time crypto advocate Sen. Cynthia Lummis asked Goldsmith Romero if she thought banks should be allowed to hold the assets of crypto companies.
“Banks do hold custody of digital assets right now,” Goldsmith Romero said.
“I don’t think it’s the FDIC’s role to tell banks what industries or companies they should be providing services to,” she added.
Lummis did not ask Crenshaw any questions during her allotted time.
Crenshaw defended her record. She mentioned specifically the agency’s decision to allow spot bitcoin ETFs to begin trading in January, a position on which she dissented.
The SEC should not have allowed these products to go live “given the significant fraud in the underlying spot markets globally,” she told Senators.
The relative lack of pushback from Senators Thursday means Crenshaw is likely to sail through her nomination as well. But as we all know, anything can happen in politics.
— Casey Wagner
173
The number of days left before taxpayers must find a new way to allocate their unused cost basis, according to new IRS guidance.
Taxpayers who have been using a universal or multi-wallet basis allocation approach will have to switch to a wallet-by-wallet or account-by-account system.
“Taxpayers in the past may have been selling a unit of BTC out of their Coinbase wallet but treating a unit of BTC as having been disposed of out of their self-custodied wallet,” accountants at Ledgible wrote in a report Thursday.
This is no longer allowed under the final IRS regulations, they added.
The TL;DR? You may want to call your accountant.
Crypto stock fluctuations
Publicly traded crypto companies had a pretty eventful news week, though the market’s response to the updates varied.
MicroStrategy revealed a 10-for-1 stock split on Thursday. The company’s share price was up about 7% this week (as of a couple hours before Friday’s close). MSTR is up 108% year-to-date.
Though the split doesn’t change the company’s inherent value, it will make the stock more affordable to certain investors and enhance the shares’ liquidity, noted Benchmark analyst Mark Palmer.
“The split should support the marketability of MicroStrategy’s stock, thereby making it easier for positive developments — including increases in the price of bitcoin — to translate into share price appreciation,” he told Blockworks.
The share price of Northern Data — a company focused on high-performance computing (HPC) and bitcoin mining — saw a roughly 12% boost this week, as of 2 pm ET. That came after it said it expects its 2024 revenues to triple year-over-year.
But news from other bitcoin miners did not meaningfully move the needle in a positive way — at least from a near-term stock price perspective.
Despite Hut 8 securing an additional 205 megawatts of power capacity on Tuesday, the bitcoin miner’s stock price fell about 3.5% this week.
Core Scientific said Monday it was set to eliminate $260 million of debt from its balance sheet after converting secured convertible notes. CORE’s price saw a slight boost Monday but ended up down about 4% for the week.
Bitfarms stock has dipped about 7.5% over the last five days despite rebounding Friday. That share price drop came during a week when the bitcoin miner named a new CEO and revealed Friday that its anticipated shareholder meeting would take place in October. The company’s shareholders are set to address rival miner Riot Platforms’ call to replace a few of its board members at that time.
Coinbase’s stock price has dropped about 3% this week despite the crypto exchange revealing a new Coinbase Wallet web app — lagging bitcoin’s 4% gain over that span.
— Ben Strack
Did You Notice
Happy Friday! It was a packed week after the July 4 holiday weekend. Congress is back in session and markets are digesting more economic data. Here are the key takeaways:
- Fed Chair Jerome Powell made his biannual rounds on Capitol Hill this week, appearing before the House and Senate to address the state of monetary policy. He reiterated that central bankers need more proof of inflation cooling before cutting rates. He also told lawmakers that trying to ensure a soft landing is keeping him up at night.
- Thursday’s CPI report showed prices are increasing less than analysts expected. May’s annual CPI came in at 3%, and core CPI, which excludes volatile food and energy, showed a 3.3% year-over-year increase in May. Stocks were relatively unimpressed with the print, but investors seem more confident than ever that the first interest rate cut will come in September.
- Also on Capitol Hill this week was Treasury Secretary Janet Yellen, who told House representatives that President Biden has been “effective” in meetings. The comments came ahead of Biden’s Thursday evening press conference, which received mixed reviews as more lawmakers called for him to drop out of the 2024 race.
— Casey Wagner
Bulletin Board
- As of publishing time, the SEC has not publicly responded to the latest revised registration statements filed by fund groups seeking to launch US spot ether ETFs. Still, signs point to the agency permitting these funds soon. Keep an eye on Blockworks.co for updates.
- Speaking of the US securities regulator, it closed its investigation into the Stacks blockchain, according to a Friday regulatory filing. The SEC does not intend to recommend an enforcement action against blockchain software developer Hiro Systems PBC, the document adds.
- BTC’s price was roughly $58,200 at 2 pm ET Friday — up about 2% from a week ago. ETH has seen a slightly better rise (at nearly 3%) over that span, hovering around $3,145.