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The price for Bitcoin tumbled as investors grew concerned about a proposed capital-gains tax increase.
Dreamstime
Prices for Bitcoin are rising as another Wall Street bank appears to be readying an actively managed crypto fund for its private-wealth clients.
JPMorgan Chase
(ticker: JPM) may launch the fund—custodied by NYDIG—this summer, the cryptocurrencies website CoinDesk reported on Monday.
A spokesman for JP Morgan declined to comment on the report to Barron’s.
Morgan Stanley
(MS) started offering privately managed Bitcoin funds to high-net-worth clients in March. One of its funds, FS NYDIG Select Bitcoin Fund LP, has raised $29.4 million from 322 investors since April 8, according to a securities filing.
Bitcoin fell into a bear market but may be climbing back. The price has gained 6.5% in the last 24 hours to around $53,700. The digital currency peaked around $64,750 on April 14 and then slid 27% to $47,275 over the following few days. Bitcoin trades 24/7 on a variety of exchanges, where prices reflect the trading volume and available supply on those venues.
Other cryptos were trading up on Monday, with Ether gaining 7.4% to $2,490, according to CoinDesk. Another crypto, XRP, was ahead 14.8% to $1.24.
Trading in cryptos has been especially erratic lately. The initial stock offering of
Coinbase Global
(ticker: COIN), the first crypto exchange to go public, coincided with a Bitcoin surge. But prices for Bitcoin and other cryptos tumbled as investors grew concerned about increases in capital gain taxes proposed by President
Joe Biden.
Turkey also may have chilled the market with indications that it would ban citizens from using Bitcoin and other cryptos for payments, though the head of Turkey’s central bank backtracked over the weekend.
Taxation of Bitcoin remains a potential stumbling block in the U.S. The IRS treats cryptos as property. As such, an investor who sells a crypto at a gain could be subject to capital-gains taxes with every transaction.
Nonetheless, investment in Bitcoin and crypto infrastructure is only accelerating from mainstream financial companies. A private crypto infrastructure firm, Securrency, said on Monday that it had raised $30 million from investors including
U.S. Bancorp
(USB),
State Street
(STT), and
WisdomTree Investments
(WTEF).
Initiatives are also under way to “tokenize” equities into crytpo formats. The Binance crypto exchange said Monday that it plans to make Binance stock tokens of
MicroStrategy
(MSTR),
Apple
(AAPL), and
Microsoft
(MSFT) available for trading this week.
Some Wall Street banks, however, are highlighting the environmental costs of Bitcoin mining, which hogs electricity from all the computers in the network that compete to process and verify transactions.
“If you think crypto is clean, think again—$1 billion of inflow into Bitcoin is equal to 1.2 million cars being driven over the course of a year,” wrote strategists at BofA Securities in a note on Friday.
Whether Bitcoin’s electricity consumption comes from fossil fuels like coal or clean-energy like wind and solar is a matter of debate. China, where coal is abundant and cheap, is a hotbed of mining activity. Miners may use a mix of coal or renewables like hydroelectric in China, though accurate data isn’t available.
Bitcoin proponents like ARK Invest, manager of the popular
Ark Innovation
exchange-traded fund (ARKK), and payments app
Square
(SQ) recently put out a white paper arguing that Bitcoin mining can be done cleanly, using renewable-energy production that would otherwise be wasted.
They also argue that crypto-mining could actually simulate investment in solar technology by encouraging utilities to invest and play the spread between Bitcoin prices and electricity prices. The last time energy companies got into trading in a big way, things didn’t end well. (Think Enron.) One can only hope this time is different.
Write to Daren Fonda at daren.fonda@barrons.com
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