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Yellen sounds warning about ‘extremely inefficient’ bitcoin

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Janet Yellen, U.S. President-elect Joe Biden’s nominee to be treasury secretary, speaks as Biden announces nominees and appointees to serve on his economic policy team at his transition headquarters in Wilmington, Delaware, U.S., December 1, 2020.

Leah Millis | Reuters

Treasury Secretary Janet Yellen issued a warning Monday about the dangers that bitcoin poses both to investors and the public.

Despite a sharp slide in price to start the week, the cryptocurrency continues to trade above $53,000 as it has received boosts from various sources. Elon Musk’s Tesla recently made a substantial purchase and has said it will accept bitcoin for transactions.

However, Yellen said there remain important questions about legitimacy and stability.

“I don’t think that bitcoin … is widely used as a transaction mechanism,” she told CNBC’s Andrew Ross Sorkin at the New York Times’ “DealBook” conference. “To the extent it is used I fear it’s often for illicit finance. It’s an extremely inefficient way of conducting transactions, and the amount of energy that’s consumed in processing those transactions is staggering.”

Mining bitcoin requires users to solve complex mathematical equations using high-powered computer setups. The electric consumption used in the process leaves an annual carbon footprint equal to the nation of New Zealand, according to Digiconomist.

In addition to consumption concerns, bitcoin also is considered to be a tool of those involved in a number of illegal activities because its use is difficult to trace.

Then there’s volatility, as the cryptocurrency’s price has seen rapid peaks and valleys during its existence.

“It is a highly speculative asset and you know I think people should be aware it can be extremely volatile and I do worry about potential losses that investors can suffer,” Yellen said.

Various government agencies have contemplated the idea of making an alternate digital currency with the hopes that it would open up the global payments system to those who don’t have access.

The Federal Reserve, where Yellen once served as chair, has studied the issue and discussed the possibility of a new digital currency along with a payments system it expects to roll out over the next several years.

“I think it could result in faster, safer and cheaper payments, which I think are important goals,” Yellen said.

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Cathie Wood sees these 2 trends as the next big things after electric vehicles

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Ark Invest’s Cathie Wood said digital wallets and genomics are the next two biggest disruptive trends after Tesla and electric vehicles.

“We’re very excited about digital wallets,” Wood said on CNBC’s “The News with Shepard Smith” on Tuesday. “We really think that these digital wallets and two-sided market places, merchants and consumers…are going to usurp a lot of the role the banks play today.”

Wood — CIO and CEO of Ark Investment Management — has made a name for herself by investing in “disruptive innovation” stocks. Wood’s flagship fund, ARK Innovation, has seen more than $16.7 billion flood into the fund in the past year, according to FactSet.

Wood has big bets on names like Square and PayPal, which dominate the digital wallet space. Square is the second largest holding in Ark Innovation, representing more than 7% of the ETF.

In China, Wood said WeChat Pay and AliPay are the major players.

“It’s going digital, its going mobile. A little bank branch in you’re pocket,” said Wood. “We’re going to have all kinds of financial services available through them, including loans, debit cards, credit cards, stock buying, bitcoin buying.”

Elsewhere, Wood said the genomics space is also set to hit escape velocity.

“DNA sequencing is going to introduce science into healthcare decision making for the first time,” said Wood. “We can honestly say that until now more than half of all healthcare decisions were in some part made through guesses or experiences. Now we’re going to have the data.”

ARK’s Genomics ETF has big bets on Exact Sciences, which makes up nearly 5% of the ETF, and Invitae. CRISPR Therapeutics is another major holding in the ETF.

“We’re going to be able to cure diseases that we never thought it would be possible to cure, including cancer,” said Wood.

Shares of ARK Innovation are up 2.5% this year and shares of ARK Genomic Revolution are up less than 1% in 2021.

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Credit Suisse is still unloading shares of Discovery from Archegos

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Credit Suisse bank.

NurPhoto | NurPhoto | Getty Images

Credit Suisse is still unraveling its positions from the blow up of Archegos Capital Management, traders told CNBC’s David Faber, putting more pressure on a beaten-down media stock.

The investment bank was shopping blocks of different classes of Discovery stock on Tuesday, Faber reported. Discovery was one of the stocks that fell sharply in late March when the family office run by hedge fund veteran Bill Hwang failed to meet its margin call. Discovery’s class A shares were down more than 4% in extended trading.

Discovery, along with fellow legacy media player ViacomCBS, saw its stock rise rapidly in the first few months of the year, apparently bid upward by the highly levered Archegos. Discovery’s class A stock rose from $30 per share at the end of December to $77 per share in mid-March before deflating. They closed at $40.38 on Tuesday.

Credit Suisse was one of the banks hit hardest by Archegos’ risky trading. The bank reported a charge of $4.7 billion in losses from the trades and announced that two of its C-suite executives were stepping down.

Credit Suisse and other Wall Street banks will sell swap positions to hedge funds and family offices, allowing the clients to gain exposure to a stock even though the bank technically owns the shares. When the stock declines and the fund fails to meet its obligations, the bank can be stuck with the losses on the shares.

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Stock futures are flat ahead of earnings season kickoff

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U.S. stock futures were flat in overnight trading on Tuesday ahead of the first batch of corporate earnings.

Dow futures rose just 10 points. S&P 500 futures gained 0.03% and Nasdaq 100 futures rose 0.02%.

On Tuesday, the S&P 500 climbed 0.4% to close at a record high. Equities shrugged off the Food and Drug Administration’s request for states to pause administering Johnson & Johnson’s Covid-19 vaccine after six people in the U.S. developed a rare disorder involving blood clots. Moderna shares gained more than 7% on the news.

After the bell on Tuesday, Pfizer CEO Albert Bourla said the drugmaker can deliver 10% more vaccine doses to the U.S. by the end of May than previously expected. Plus, Moderna said its Covid-19 vaccine was more than 90% effective at protecting against the virus six months after a person’s second shot.

The technology-heavy Nasdaq Composite rallied more than 1% Tuesday, with Amazon, Apple, Alphabet, Netflix, Microsoft and Tesla all closing higher.

The Dow Jones Industrial Average lost 68 points, after dropping more than 150 points earlier in the session.

The Labor Department’s consumer price index came in slightly hotter than expected on Tuesday. The CPI rose 0.6% from the previous month but 2.6% from the same period a year ago. Economists polled by Dow Jones projected the headline index to rise by 0.5% month-over-month and 2.5% year-over-year.

Investors are gearing up for the first wave of corporate earnings on Wednesday when JPMorgan, Goldman Sachs and Wells Fargo report before the bell. Bank stocks have risen sharply so far this year, with the KBW Bank Index easily outpacing the S&P 500. 

Analysts are expecting strong investment banking results but a slowdown in loan growth. Plus, loan reserve releases could spark high earnings numbers.

Market participants will also be watching for the Coinbase direct listing on Wednesday. Crypto investors are hailing the company’s stock market debut as a major milestone for the industry after years of skepticism from Wall Street and regulators. The price of bitcoin surged to a fresh record high of more than $63,500 on Tuesday.

Federal Reserve Chair Jerome Powell will discuss the economic recovery from the pandemic at noon on Wednesday at The Economic Club of Washington.

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