Bitcoin at February lows after Musk tweets; AT&T merging WarnerMedia with Discovery– as it happened

Graeme Wearden

from on 2021-05-17 17:57 (#5HX5W)

Rolling coverage of the latest economic and financial news

Latest: AT&T's to spin off WarnerMedia, merge with rival Discovery
Deal brings Warner Bros, HBO, CNN together with Discovery's TV shows
Introduction: Bitcoin plunged last night after Musk tweet...
Musk clarifies speculation": Tesla has not sold any Bitcoin
Analysts: Bitcoin has lost upward momentum

6.52pm BST

Time to recap.

Bitcoin has fallen to its lowest level in three months, after Elon Musk sparked fears that Tesla could sell its holdings in world's largest cryptocurrency.

Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn't blame him...".

Indeed

To clarify speculation, Tesla has not sold any Bitcoin

The big story came today in the Cryptocurrency world with Bitcoin and Ethereum both hit on the open after another tweet from Elon Musk.

Simply a one-word tweet Indeed", in reaction to a statement indicating the possibility of Tesla selling their Bitcoin holdings in the future, caused two of the biggest cryptocurrencies to fall by such amounts.

Attacks on critical US infrastructure facilitated by cryptocurrencies will not go unnoticed by the US government and other countries. I would argue that the regulatory threat to cryptocurrencies has increased exponentially, more so even than big-tech regulation.

Bitcoin has been under pressure since the Musk Tweet, but I would argue that the beginning of the end of the wild-West of crypto-mania is now upon us.

It is true that the current sell-off in Bitcoin price is mainly due to Elon Musk...But the reality is that bitcoin lost its upward momentum a long time ago, and this is because all that positive news about bitcoin failed to push bitcoin prices higher.

6.39pm BST

The government's bill for tackling Covid-19 has risen by 100bn since the start of the year and now stands at 372bn, according to the independent watchdog that oversees Whitehall spending.

Figures from the National Audit Office highlighted the financial impact of the lockdown imposed to cope with the winter surge in cases of the pandemic and brought a stark warning from the MP who chairs the Commons committee of public accounts.

Government expects to spend an eye-watering 372bn in response to the pandemic, and public accountability has never been more important."

6.22pm BST

Many UK holidaymakers are booking stays at two or more hotels with a view to cancelling all but one at the 11th hour, prompting fears among accommodation businesses of last-minute cancellation chaos".

Many holidaymakers have booked both a foreign holiday and a UK stay, and our data shows they are often holding on to both. If they decide at the last minute to risk a holiday abroad, a late rush of cancellations in the UK would create chaos across the whole industry as hotels scramble to fill their suddenly vacant rooms.

Many of these just won't be filled, resulting in tens of millions of pounds in lost revenue."

5.30pm BST

In the City, the FTSE 100 index of blue-chip shares has closed slightly lower - down nearly 11 points at 7033.

Travel and hospitality firms were among the fallers today, amid concerns that the UK's plans to end the lockdown could be disrupted by the new variant of Covid-19 first detected in India.

With the UK embarking on the next stage of its economic reopening, travel and leisure stocks have had a disappointing day with the likes of EasyJet and IAG slipping back, along with Ryanair shares after the airline posted a record annual loss.

Other areas where we've seen declines are in the likes of Hollywood Bowl, Premier Inn owner Whitbread, pub chain JD Wetherspoon and Wagamama's owner Restaurant Group, as rising cases of the Indian variant, raise concerns that the full relaxation in June might get pushed back.

4.56pm BST

The pandemic has forced the World Economic Forum to cancel its annual gathering of world leaders for this year.

Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned.

This is despite the excellent support provided by the Government of Singapore.

The @wef Special Annual Meeting in Singapore is cancelled. It was the responsible thing to do. But there are plenty of opportunities to join a global discussion on the things that matter.

Virtual Ocean Dialogues 25-26 May https://t.co/BCyodMr5UX

Climate Breakthroughs: The Road to Cop26, May 27 https://t.co/k5sFqPoI5T

The Jobs Reset Summit, June 1-2 https://t.co/QePuxsUHLm

4.18pm BST

Back in the UK, airlines and travel firms are urging ministers to add more countries to the green list', which people can visit without needing to quarantine or self-isolate.

Our transport correspondent Gwyn Topham explains:

Airlines and travel firms have urged the government to move quickly to open up travel to more European destinations and the US, as thousands of people flew abroad after Britain's ban on foreign holidays was lifted on Monday.

British Airways and Heathrow criticised the limited green list of 12 countries where quarantine-free travel is permitted, and called on the government to publish an expected list" of destinations under consideration for summer travel to allow customers to plan.

British Airways CEO Sean Doyle is urging the government to add more countries to the travel 'green list', including the US.

But Matt Hancock has said he would not recommend anybody going to a country on the amber or red list, especially for a holiday. pic.twitter.com/52hwAuS5gt

4.13pm BST

Neil Hendron, a partner at law firm Gowling WLG, says the WarnerMedia-Discovery merger highlights the permanent shift in the way people watch TV, after more than a year of lockdowns and restrictions.

2021 has been a very busy year for M&A so far and that trend looks set to continue - across many sectors, and in particular in media and technology.

While today in England we are taking our first tentative steps into socialising indoors again, the pandemic appears to have permanently shifted the way people want to consume content - with the market for streaming services looking set to continue to grow and become increasingly competitive.

3.25pm BST

The Warnermedia/Discovery merger will create a third "titan of media", says Ed Moya, a senior market analyst at OANDA.

And that could mean smaller rivals are crushed, meaning consumers ultimately end up paying more, he warns:

A mega-media deal may have created a giant that could go toe-to-toe with Disney+ and Netflix. AT&T will spin off its media business and merge with Discovery. Shares of both AT&T and Discovery were higher on the $43 billion deal. The new combined media giant will have $20 billion in free cash flow to spend on content, which is $3 billion more than what Netflix committed to spend this year.

Now we have three titans of media, which should mean spending wars for content will likely crush the smaller streaming services. Costs will eventually go up and the consumer might actually miss the days of cable TV and adding a couple premium channels.

2.52pm BST

Shares in AT&T and Discovery are both rising on Wall Street, as investors reacts to their plan to create a new streaming giant.

Discovery jumped by 10% at the open, and is currently up over 6%.

Change in valuations in past 5 years:

Netflix: up $180 billion

Disney: up $155 billion

Discovery: up $7 billion

AT&T: down $6 billion

2.19pm BST

The merged company will be 71% owned by AT&T's shareholders and 29% by Discovery's.

AT&T is receiving $43bn (a mixture of cash, and a reduction in the telecom's giant's debt).

Other details, including the future of WarnerMedia CEO Jason Kilar in the new company and how the combined properties and services will be arrange have yet to be worked out, executives said on a call with reporters after the deal was announced.

The opportunities in direct to consumer streaming are rapidly evolving, and to keep pace and maintain a leadership position, several things are required -- global scale, access to capital, a broad array of high quality content and industry best talent,' AT&T chief executive John Stankey told a news briefing.

2.06pm BST

The WarnerMedia-Discovery merger also highlights the need for large amounts of quality content to compete with Netflix and Disney+, following the move towards streamed TV (which accelerated in the pandemic).

Ben Barringer, equity research analyst at Quilter Cheviot, explains:

AT&T are just a few years late to the party, but it is better too late than never at all. AT&T has finally realised that internet streaming television is a thing, and to be successful you need scale and great content.

To put subscriber numbers into context, HBO Max has 64 million subscribers and Discovery has 15 million. At a combined 79 million total subscribers, the new streaming service has a long way to go to achieve the same scale as Netflix or Disney+, which have 207 million and 104 million subscribers respectively.

1.50pm BST

AT&T's decision to spin off WarnerMedia into a merger with Discovery shows that its lavish acquisition strategy" of building a media empire, alongside its wireless and telecoms networks, has failed.

So explains Kester Mann, the director, consumer and connectivity at CCS Insight:

The deal is a tacit recognition from AT&T that its lavish acquisition strategy to assemble an empire of media holdings has spectacularly failed to achieve its objectives.AT&T is determined to take on giant streaming providers such as Netflix and Disney, but clearly feels it is unable to take this leap alone as the market for consuming content continues to evolve.AT&T has been facing a dilemma familiar to many other large telecom operators: does it sharpen its focus on fixed-line and mobile networks to offer best-in-class connectivity amid questionable long-term return, or place bold risks on fuelling new revenue from adjacent areas such as content? The company's decision to work with Discovery to better maximise its media assets is a strong clue to where its priorities lie.

The transaction represents a humbling retreat for AT&T, which ran up one of corporate America's biggest debt piles in a gamble to become the world's biggest vertically integrated content and distribution company.

This should put an end to the debate about synergies between content and distribution,' said Jonathan Chaplin, analyst at New Street Research, who called the deal complete capitulation'.

1.12pm BST

US telecoms giant AT&T has agreed to combine its WarnerMedia business with Discovery, creating a new streaming giant to challenge Netflix and Disney.

The deal marks the latest round of consolidation in recent years as broadcasting, media and tech companies seek scale to compete globally in the streaming age.

In the past 18 months a swathe of new streaming services have launched, with Disney+ racing to more than 100 million subscribers, Netflix topping 200million and Amazon's Prime Video estimated to have in excess of 150 million regular users.

12.40pm BST

Shares in UK hospitality and travel-focused companies have dipped today, as people are urged to be cautious as pandemic restrictions are lifted.

A former government chief scientific adviser, a leading public health specialist and the union representing Britain's doctors are urging the public to stick to meeting outdoors to reduce the risk of catching or spreading the variant.

Prof Sir Mark Walport, a former director of the Wellcome Trust and a chief scientific adviser until 2017, called on the public to be cautious. My personal judgement is that I will do things outside as far as possible," he said. My advice is that just because you can do something doesn't necessarily mean you should."

GUARDIAN: Britain opens up - but experts warn public to stick to meeting outdoors #TomorrowsPapersToday pic.twitter.com/aGvc45jrzS

The red and amber list countries are places that you shouldn't go to unless you have an absolutely compelling reason,

TIMES: Holiday plans thrown into chaos #TomorrowsPapersToday pic.twitter.com/uysFAYfF4R

I urge everyone to be cautious and take responsibility when enjoying new freedoms today in order to keep the virus at bay.

It's a big day for many businesses as the UK lifts more Covid-related restrictions. This should have been cause for celebration, but all eyes are on the Indian variant and whether the Government is going to impose new lockdowns, be it localised or national," says

Businesses will have to make hay while the sun shines, albeit interspersed by lots of dark clouds.

Airlines are also at a major turning point today as restrictions ease slightly. They are doing everything they can to cater for demand within the still-tight rules and Ryanair implies that customer appetite for travelling is picking up, judging by its bookings since April.

12.16pm BST

Mihir Kapadia, CEO of wealth management company Sun Global Investments, predicts that crypto assets will struggle to recover recent losses:

Crypto markets continue to be source of frustration, as they hit their lowest since February. Elon Musk, who has had one of the biggest influences on the market in recent times, tweeted over the weekend that Tesla could be selling its holdings in Bitcoin.

Despite later clarifying that nothing had been sold, this still sparked a rapid sell-off as investors feared the worst. Prices fell to lows of $42,212.56, and we could expect crypto markets to struggle to reach its previous highs due to the current sentiment being held towards Musk and his drastic market actions as of late."

It's 'interesting' to see that one person, who's company owns less than 0.2% of an asset class, which aims to be a store of value, has such an impact on price #volatility.#bitcoin pic.twitter.com/CITmOfHRUr

11.14am BST

Back on bitcoin... the Financial Times flags that bitcoin's recent volatility has raised new doubts among institutional fund managers over the future of cryptocurrencies as an asset class.

Here's a flavour:

Our stance with clients is the 10-foot pole rule: stay away from it," said Jason Pride, chief investment officer of private wealth at Glenmede. I don't think the Fed and other regulators are fans of the current market structure for cryptocurrencies."

Rob Sharps, president and head of investments at T Rowe Price, told the Financial Times: Crypto has an impact across capital markets, and we're capital markets experts. Ultimately, the mandates we manage for clients are not well suited for investing in cryptocurrencies, and we recognise the high level of speculation in this space."

Asset managers express caution on cryptocurrency after price swings https://t.co/sjI89zCkeK

10.48am BST

China's economic recovery appears to have cooled last month, with manufacturing production and consumer spending both slowing.

Production demand continued to grow... and the economy continued to stabilise and resume development," said NBS spokesman Fu Linghui, though he cautioned that the global epidemic situation remained complicated, and the recovery of the world economy is very uneven".

10.18am BST

The rise of homeworking during the pandemic was most prevalent among IT and communications workers, among women, professional workers, and those employed in and around London.

That's according to new data from the Office for National Statistics:

Our latest Annual Population Survey data show that in 2020, 25.9% of those in employment worked at home at some point in the week before they were surveyed, up from 12.4% in 2019 https://t.co/nuw7X0L9h6

The groups with the highest rates of homeworking in 2020 were

women
those working in information and communication
those residing in or working in London
those in professional occupations

https://t.co/MGS0MfsW53

New results from the Management and Expectations Survey suggest that better-managed firms were more able to switch to homeworking in 2020 https://t.co/xKg36V3YYo pic.twitter.com/r0LxgLnOwa

10.10am BST

Another Musk pivot: #Bitcoin is getting a reprieve, back ~$45k after a tweet from Elon Musk that Tesla hasn't sold any of the cryptocurrency. Still, Bitcoin is still well below the levels seen last week when Tesla was said to halt receiving payments in Bitcoin. pic.twitter.com/KPxusf8yWx

9.53am BST

Ryanair has posted the biggest annual loss in the company's 35-year history, after Covid travel restrictions and national lockdowns nearly wiped out traffic last year.

The airline swung to an 815m (701m) loss in the 12 months to 31 March, compared with a 1bn profit a year earlier, after passenger numbers plunged 81% in what it said was its most challenging" year to date.

9.43am BST

Although bitcoin has risen back to around $45,000 this morning, it's still trading around its lowest levels since the end of February - and nearly a third off April's record high.

Finally, I thought Donald Trump's ban from Twitter would mean markets would suffer less noise'. I was wrong. First meme stocks came along, now we have Elon Musk moving crypto prices with his missives. The latest in the drama saw Bitcoin jump about $2.5k this morning after Elon Musk denied Tesla had sold its Bitcoin holdings.

A nice pop, but this is small versus the Musk-induced selling that has been taking place lately. In addition to Tesla saying it would stop accepting Bitcoin as payment, Musk indicated in a reply to a tweet that the company was dumping or had already dumped all its Bitcoin. Prices fell sharply over the weekend and at $44k the crypto asset is still down by around a third from the all-time high near $66k set in April.

9.29am BST

The possibility of new regulation is also weighing on bitcoin, argues Jeffrey Halley of OANDA.

He writes that the wild-West of crypto-mania" is coming to an end, following the Colonial Pipeline ransomware attack that triggered fuel shortages and panic buying at some US gas stations.

Bitcoin has been under pressure since the Musk Tweet, but I would argue that the beginning of the end of the wild-West of crypto-mania is now upon us.

Cryptocurrencies can be a pretty poor currency for criminals. Bitcoin is built on a digital ledger that publicly records every transaction, with users identified by a string of characters called a wallet address." If a law enforcement agency can figure out a wallet's owner, it essentially has access to that person's entire transaction history, no subpoena required.

8.50am BST

Chris Weston of brokerage Pepperstone reports that some bitcoin traders were forced to liquidate their positions due to this latest volatility triggered by Elon Musk (because they couldn't meet margin calls on either long, or short, bets).

Weston explains:

Elon Musk, it seems, has been taking on all comers on Twitter over the weekend and caused some chunky gyrations across the coins - our weekend trading has kicked up, and we're looking at some serious liquidations through the exchanges, where the last 24 hours we've seen over to $1.5bn liquidated.

Why would I want to buy bitcoin right now - even if I'm bullish - until the liquidation is over and you see some consolidation in price?"

8.36am BST

This chart shows how Elon Musk's clarification this morning sent bitcoin rallying back from three-month lows....

#Bitcoin bounces 7% after Elon Musk confirms that Tesla hasn't yet sold any of their Bitcoin holdings. pic.twitter.com/Zj9v5zYaEV

Musk has boosted crypto markets with his enthusiasm for the asset class, but has lately roiled trade by appearing to cool on bitcoin in favour of its one-time parody, dogecoin.

The gyrations are beginning to spook even steeled traders.

7.58am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Bitcoin is on a wild ride today as Tesla CEO Elon Musk sparked alarm that the electric vehicle maker could sell its holdings -- before clarifying that it has not sold any bitcoin.

Bitcoiners are going to slap themselves next quarter when they find out Tesla dumped the rest of their holdings. With the amount of hate @elonmusk is getting, I wouldn't blame him..."

Indeed..."

pic.twitter.com/4OC3CEKozo

Indeed

To clarify speculation, Tesla has not sold any Bitcoin.

To clarify speculation, Tesla has not sold any Bitcoin

ELON MUSK SAYS TESLA HAS NOT SOLD ANY BITCOIN

In an exchange on a Twitter thread, the mercurial Mr. Musk implied that Tesla, having backflipped on its decision to accept Bitcoin as a form of payment, may indeed" offload its Treasury holdings of the asset.

The speculation has seemingly led traders to try and front run Tesla's potential move, as the thrust behind mainstreaming Bitcoin slows down a little more.

It is important to keep in mind that it is true that the current sell-off in Bitcoin price is mainly due to Elon Musk. But the reality is that Bitcoin lost its upward momentum a long time ago, and this is because all that positive news about Bitcoin failed to push Bitcoin prices higher.

It was clear that Bitcoin prices went too far, and a correction was due. This correction is taking place now, and it is likely that we may see the Bitcoin price decline further. The near-term support for Bitcoin is near the 38K price level.

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