(Reuters) - A look at the day ahead in U.S. and global markets by Amanda Cooper.
Bitcoin is back in the headlines today, having vaulted above $105,000 for the first time on record, after a nod from U.S. President-elect Donald Trump to make crypto great again. In an interview on Thursday with CNBC's Jim Cramer, Trump suggested he could go ahead with plans to create a strategic bitcoin reserve, much like the country's strategic oil reserve.
"We're gonna do something great with crypto because we don't want China or anybody else - not just China but others are embracing it - and we want to be the head," Trump said.
It's fairly vague, but, together with the inclusion of MicroStrategy - a software firm that is the world's biggest corporate owner of bitcoin - into the tech-heavy Nasdaq 100, it's been enough to ignite a new push higher in the price on Monday. Next (LON:NXT) stop - $110,000?
MicroStrategy owns nearly 425,000 coins, worth around $45 billion at current levels, equivalent to about 2% of bitcoin's total market value, according to BitcoinTreasuries. Indeed, shares in the company are up around 6% in pre-market trading already.
Crypto has been a major beneficiary of flows in the so-called "Trump trade", on the premise that the incoming administration will take a more relaxed approach to regulation in general and with crypto in particular.
How a strategic reserve of bitcoin, whose supply is capped at 21 million coins, would work is not clear. Governments own around 13.9% of total supply, according to BitcoinTreasuries, with the United States and China vying for the position of biggest. The U.S. has just shy of 200,000 coins - 0.943% of total market cap -, worth $20.7 billion, while China owns 190,000, or 0.905% of the market.
Bitcoin has risen by over 190% this year. The launch of U.S. exchange-traded funds in January linked to the spot price have brought in nearly $35 billion in investment flows, according to LSEG data. BlackRock (NYSE:BLK)'s iShares Bitcoin Trust has been the largest recipient, with over 500,000 coins, according to BitcoinTreasuries data.
BlackRock itself said last week it recommends interested investors allocate as much as 2% of their portfolios to bitcoin, citing, among other things, its potential as a diversifier, given that it tends not to move in lockstep with other major asset classes.
Trump said on the campaign trail that, if elected, his administration would commit to keeping 100% of all the bitcoin the government owns or acquires in the future.
The snag for crypto devotees is a big reserve would mean fewer tokens for investors to trade. It would also risk creating serious turbulence in the market if the government ever did sell part of that stockpile.
Suggestions for how it might work have included the Federal Reserve possibly managing the reserves for the Treasury Department, much as it does with gold. Alternatively, a bitcoin stockpile could look more like the Strategic Petroleum Reserve, where both the president and Congress have varying amounts of control, experts say.
Either way, Trump appears keen to display his pro-crypto credentials. He's named former PayPal (NASDAQ:PYPL) executive David Sacks as White House czar for artificial intelligence and cryptocurrencies. He's also said he would nominate pro-crypto Washington attorney Paul Atkins to head the Securities and Exchange Commission. Atkins is more pro-deregulation than pro-crypto, specifically, but his appointment would mark a departure from hard-charging SEC Chair Gary Gensler.
Key developments that should provide more direction to U.S. markets later on Monday:
* December New York Federal Reserve manufacturing survey
* December flash S&P Global (NYSE:SPGI) Purchasing Managers' Index (PMI)