A Bitcoin ATM is seen inside a tobacco shop in New York City.
Michael M. Santiago/Getty ImagesInvestors puzzled by what’s happening in financial markets need to look no further than Bitcoin.
The cryptocurrency rose more than 15% Monday, and hit a new 52-week high Tuesday morning at more than $48,000. Year to date, Bitcoin is up almost 60%. That seems ridiculous.
But maybe it all makes sense? The latest leg higher occurred after Elon Musk shocked investors Monday by announcing that Tesla had bought $1.5 billion in Bitcoin. Tesla appears to be the first S&P 500 company to allocate a significant amount of its cash to the alternative investment.
Bitcoin’s rally comes as the yield for junk bonds—called junk because they are issued by companies without the same financial strength as, say, Apple —dropped below 4% for the first time ever. When risky bonds yield that little, perhaps Bitcoin looks like a legitimate alternative.
The cryptocurrency is also responsible for at least one short squeeze. Microstrategy, a heavily shorted small-capitalization tech stock, is up 64% over the past five trading days. The reason appears to be Microstrategy, like Tesla, decided to invest in Bitcoin.
Bitcoin explains everything.
—Al Root
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Senate Trial Begins as Trump’s Lawyers Call Impeachment ‘Patently Ridiculous’
The Senate will begin former President Donald Trump’s impeachment trial at 1 p.m. ET Tuesday. He’ll face a single charge of “incitement of insurrection” for his role in the Capitol Hill riot that took place on Jan. 6, including telling his supporters to “fight like hell” before the violence broke out.
- Tuesday’s proceedings will include four hours of debate on the trial’s constitutionality, followed by a vote. If a simple majority votes to proceed, arguments on the article of impeachment resume Wednesday at noon. Each side gets 16 hours to make their case. Senators then get four hours to ask questions.
- Ahead of the trial, Trump’s lawyers filed a 78-page brief on the former president’s defense, branding the entire exercise “political theater” that is “patently ridiculous” given that he is no longer in office.
- “This impeachment proceeding was never about seeking justice,” Trump’s lawyers argue in the brief. They added that when the former president told his followers to fight, it was meant figuratively and he was exercising his First Amendment right to free speech.
- House Democrats serving as the case’s prosecutors responded, saying, “President Trump’s incitement of insurrection was itself a frontal assault on the First Amendment.” They added, “the House did not impeach President Trump because he expressed an unpopular political opinion. It impeached him because he willfully incited violent insurrection against the government.”
What’s Next: The trial will break early Friday but is expected to resume Sunday. After the trial, the Senate plans to shift its attention to passing a Covid-19 stimulus package.
—Ben Walsh
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Electronic Arts Agrees to Buy Glu Mobile for $2.4 Billion
Videogame giant Electronic Arts said it will acquire mobile-videogame publisher Glu Mobile for $2.4 billion in cash, as the popularity of at-home games continues amid the pandemic.
- EA is paying $12.50 for each Glu share, a 33% premium to Glu’s Monday closing price. Glu shares were up 34% in after-hours trading while EA stock was up almost 1%.
- Glu makes mobile games such as Disney Sorcerer’s Arena, WWE Universe, Diner Dash, and Kim Kardashian: Hollywood. EA has titles that include Apex Legends and Madden, as well as the FIFA and Battlefield franchises.
- Together the companies would report a lineup of mobile games that generated bookings—a videogame-sales figure that excludes deferred revenue—of $1.32 billion over the last 12 months.
What’s Next: EA expects the deal to close in the June quarter. “We did this deal because we believe mobile is the fastest-growing platform on the planet” for videogames, EA CEO Andrew Wilson told The Wall Street Journal.
—Mary Romano and Max A. Cherney
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China Blocks Popular Clubhouse Chat App
Beijing appeared to put an end to a brief period of conversations online about topics such as the persecution of Uighurs and Tiananmen Square protests by shutting Chinese users out of Clubhouse, a newly popular, audio-only discussion app.
- Founded in 2014, Clubhouse has some two million users. After its latest round of funding in January led by venture-capital firm Andreessen Horowitz, the start-up is valued at $1 billion, Axios reported.
- Often marketed as a place where elite conversations can happen away from the eyes of the broader public, Clubhouse caught on in China as a place where topics officially off-limit could be discussed with relative ease and openness.
- The app features groups where discussions can, according to its users, feel like an intimate dinner party or star-studded panel discussion. It’s increased in popularity over the past year as Covid-19 social distancing measures have left people craving interaction and entertainment.
- Elon Musk is among Clubhouse’s well known users and last week he used the platform to grill Robinhood CEO Vlad Tenev about restrictions on buying shares in so-called meme stocks.
What’s Next: It’s unclear how many Chinese users have turned to Clubhouse. Many are using virtual private networks, or VPNs, to continue to access it despite the so-called Great Firewall. In the U.S., the company has so far avoided the political scrutiny faced by larger social media platforms like Twitter and Facebook.
—Ben Walsh
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Covid-19 Cases Continue to Drop, Prompting Some Reopening Plans
For the first time this year, the number of new reported Covid-19 cases in the U.S. fell below 100,000 this week. Still, the Centers for Disease Control and Prevention cautioned that new, more transmissible variants could reverse that trend.
- Data compiled by Johns Hopkins University showed 88,000 new cases on Monday. The drop came as Covid-19 hospitalizations continued their recent fall as well, with about 80,000 Americans currently in hospitals with the virus—the lowest level since mid-November, according to data compiled by the Covid Tracking Project.
- Still, the new head of the CDC warned Monday that the new variants of Covid-19 are a threat to the U.S. and that measures such as masking and social distancing are still required to reduce infections.
- In order to ramp up the American vaccination effort, which is currently averaging 1.5 million shots a day, the Biden administration said the Department of Defense will deploy more than 1,000 troops to help with vaccine delivery. Some of the soldiers will be in California by the weekend.
What’s Next: With cases across the U.S. falling, the Biden administration will offer new federal guidelines for how and when schools can safely reopen for in-person instruction as early as Wednesday. In New York City, once the epicenter of America’s pandemic, indoor dining will return Friday after being suspended during the winter surge.
—Ben Walsh
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U.S., France Flex Muscles in South China Sea
Two U.S. carrier groups are conducting exercises in the waters disputed by China, raising Beijing’s ire as France announced one of its attack submarines had sailed through the zone.
- The USS Theodore Roosevelt and Nimitz “conducted a multitude of exercises aimed at increasing interoperability between assets as well as command and control capabilities,” the U.S. Navy said.
- This came days after the USS John S. McCain was sent to “assert navigational rights and freedoms in the vicinity of the Paracel Islands,” an archipelago disputed by Vietnam, Taiwan and China.
- A Chinese foreign ministry spokesman denounced the current military exercises as “a show of force.”
- French Defense Minister Florence Parly said Monday night that a French attack submarine and its support vessel had just sailed through the South China Sea to reaffirm, together with Australia, Japan and the U.S., that “international law is the only rule that matters.”
- International powers have contested China’s ambitions on most of the resource-rich area, after Beijing built military outposts on reefs and sandbars transformed into man-made islands in order to claim sovereignty on the 12-miles zone of territorial waters.
What’s Next: The exercises are the first under the new U.S. administration, and the Navy posted a photo to Twitter of a phone call between President Joe Biden and Rear Admiral Jim Kirk aboard the Nimitz. The simultaneous French action seems to chime with Biden’s preference for working with allies when dealing with China.
—Pierre Briançon
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***
—Newsletter edited by Matt Bemer, Anita Hamilton, Ben Levisohn, Stacy Ozol, Mary Romano
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