This week’s MoneySmart financial news highlights the recent surge in Bitcoin, as it achieved a major milestone by crossing the key level of US$30,000 once again since April. Meanwhile, the semiconductor industry battle continues to heat up with Intel’s mammoth investment of US$33 billion in Germany to build chip manufacturing plants. In the EV space, Tesla’s stock got downgraded by Morgan Stanley from overweight to equal weight, while the US government is turbocharging the shift to electric vehicles with Ford securing a massive US$9.2 billion loan from the US Department of Energy.
Bitcoin jumps above US$30,000 for the first time since April
This week, Bitcoin crossed the US$30,000 key level, which it had not reached since April 2023. Despite facing strong selling pressure due to recent regulatory concerns around cryptocurrency exchanges like Binance and Coinbase, the atmosphere has turned positive for Bitcoin, driving its price higher. What could be the driving forces behind this upward surge? Here are 4 possible catalysts that could have contributed to it:
1) The launch of an institutional exchange backed by Fidelity, Schwab, and Citadel
EDX, a new institutional cryptocurrency exchange that is supported by big names such as Fidelity, Charles Schwab, and Citadel, officially launched on June 20. EDX aims to attract “industry leaders” by incorporating traditional finance practices and a noncustodial model to minimize conflicts of interest and avoid the attention of the SEC’s regulation.
While currently offering spot trading for 4 coins, including Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, EDX’s expansion plan doesn’t stop there. EDX has raised funds from strategic investors such as Miami International Holdings, DV Crypto, Global Trading Strategies, GSR Markets, and Hudson River Trading and is set to launch its clearing house later this year to sell trades executed at the exchanges. The launch of EDX Markets signals that institutional investors are still deeply interested in the cryptocurrency space, despite the ongoing regulatory crackdown by the U.S. Securities and Exchange Commission (SEC).
2) BlackRock filed for Bitcoin ETF
Investment management giant BlackRock has made a notable move towards the cryptocurrency space by filing for the first-ever Bitcoin spot exchange-traded fund (ETF) in the US on June 15. If approved, the ETF will provide investors with a regulated and hassle-free way to gain exposure to Bitcoin.
3) The pause in the FED interest rate decision
With the Fed putting a hold on rate hikes, the crypto market has seen a bit of relief and an opportunity for a rally. The positive sentiment stemming from the Fed’s decision has influenced investors to turn their attention towards riskier assets, as reflected by the recent surge in the Nasdaq. As Bitcoin and Nasdaq have a correlation, Bitcoin has also experienced an increase in value, following the trend of the stock market.
4) The Fed’s comment on stablecoin
At the semi-annual hearing on Fed policy this Wednesday, Federal Reserve Chair Jerome Powell expressed the Fed’s view that stablecoins are a form of money and that the Federal Reserve Board supports a strong role in regulating stablecoins in the future. This statement indicates that the government is taking an interest in the cryptocurrency space and may be moving towards stricter regulations, but Powell’s comment is a positive sign for the space, as it suggests that the Fed is not opposed to the existence of stablecoins as long as they are in line with the government’s regulations.
Intel plans to build a US$33 Billion chip factory in Germany
When it comes to the chip industry, Intel might not be the first name that comes to mind, but that could soon change because Intel is upping its game in the chip industry by investing in a new factory complex in Germany.
The tech giant has closed a deal worth $33 billion with the German government to construct a brand new chip manufacturing facility complex in Magdeburg, Germany. Intel will receive a third of the funding from the German government and the first facility in Germany is expected to open in 4 to 5 years.
The mammoth investment is part of Intel’s plan to diversify beyond Asia and towards Europe and the US, in line with CEO Patrick P. Gelsinger’s plan to make Intel a leader again in semiconductor manufacturing and technology as well as position itself to become a third-party manufacturer for other companies. Intel plans to meet growing chip demand by building 2 more plants in Poland and Israel to keep up with its goal.
Tesla’s downgrade from Morgan Stanley
With Tesla shares plummeting almost 4% on Thursday, Morgan Stanley analysts downgraded the popular EV company from Overweight to Equal Weight, raising the price target for Tesla shares from $200 to $250. Despite this increase, the new target still suggests a modest downside to yesterday’s closing price. It is worth noting that Tesla shares closed 5.5% lower yesterday.
While the analysts have long been among Tesla’s biggest supporters, they now believe that the stock’s valuation has reached a “fair” level and that it’s time to step back. However, Morgan Stanley is quick to clarify that they are “not trying to call ‘the end’ to the Tesla rally” and that the company remains an important player in the EV market. In fact, the analysts note that Tesla is both an AI beneficiary and an auto company, making it a must-have in any EV portfolio.
Ford gets a US$9.2 Billion loan from the Department of Energy for EV battery plants
Ford has just secured a massive $9.2 billion low-interest loan from the US Department of Energy to build 3 battery plants for their future electric cars, with the goal of producing 2 million EVs worldwide annually by 2026. The loan will be provided to BlueOvalSK (BOSK), a joint venture between Ford and SK On, which is building a plant in Tennessee and 2 more in Kentucky.
The Energy Department is confident that this loan will help the US achieve net-zero electricity by 2035 and ensure that EVs make up 50% of all new car sales by 2030. As expected, the EV market will continue to grow with the government’s support.
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