Here’s what you’ll find in today’s edition:

• It’s Cabinet building season.

• Another milestone for the largest bitcoin ETF. How big could it get?

• We recap this week in economic data.

Trump Cabinet picks face tough questions 

The Senate has wasted no time in starting the confirmation process for President Trump’s Cabinet hopefuls. 

Three of his more controversial nominees faced questions on Capitol Hill yesterday: RFK Jr., Tulsi Gabbard and Kash Patel. They are up for health secretary, director of national intelligence and FBI director, respectively. 

RFK Jr.'s two days of hearings mostly focused on his past comments on vaccinations, highlighting some of his more contentious views that even some Republicans can’t get behind. 

“Your past of undermining confidence in vaccines with unfounded or misleading arguments concerns me,” Sen. Bill Cassidy said Thursday, adding at the end of his questioning that he still needs to consider how he’ll vote. 

Gabbard, former Democratic congresswoman-turned-MAGA-celebrity, faced criticism from both sides. Dems and Reps alike wanted Gabbard to explicitly denounce Edward Snowden as a traitor, which she refused to do. 

Intelligence Committee members also had the opportunity to question Gabbard behind closed doors. The vote to advance her confirmation will also be private, although some Republicans are pushing for a public vote, which, in theory, would pressure the party to support Trump. 

Of the three, Patel seems to have the most outward Republican support — or at the very minimum, the least Republican opposition. Democrats however were concerned with Patel’s past comments on a range of right-wing touchpoints, including his praise of Jan. 6 rioters and support of QAnon influencers. 

“I have no interest, no desire, and will not, if confirmed, go backwards,” Patel said in response to concerns that he’d abuse his position. “There will be no politicization at the FBI. There will be no retributive actions taken by any FBI.”

Howard Lutnick, who’s vying to become commerce secretary, faced senators on Wednesday. The Senate Commerce Committee is set to vote on Lutnick on Feb. 5. 

Notably, Lutnick confirmed his firm Cantor Fitzgerald has a convertible bond with cryptocurrency  company Tether. It was the first time he has publicly acknowledged the financial institution’s ties to the stablecoin issuer. 

Lutnick also said that he would sell “everything,” including his personal assets and business interests, should he be confirmed for the position. 

Several Democrats, including Sens. Maria Cantwell and John Hickenlooper, questioned Lutnick about Tether, bringing up concerns about the stablecoin’s reserves and how it could be used by illicit actors. 

“Tether did no business with anyone that wasn’t KYC appropriate,” Lutnick said, adding that the public nature of the blockchain makes tracking illicit transactions easier. 

With Republicans’ 53-47 majority, the GOP can only afford to lose three votes on any confirmation should all Democrats oppose Trump’s picks. 

Outside of confirmation hearings, senators are also scheduled to address a key pain point for much of the cryptocurrency industry: debanking. The Banking Committee next week will host its first hearing on the topic. On the witness list is Anchorage Digital CEO Nathan McCauley. 

Over in the House, the Financial Services Committee will host a hearing on Feb. 6 on “Operation Choke Point 2.0,” which the industry has taken to calling the alleged targeted attack on crypto companies and their access to banking services. Witnesses have not yet been published. 

Unplug this weekend — there’ll be plenty of political drama to follow next week.

— Casey Wagner

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The revenue crypto exchange Kraken said it tallied in 2024. That was more than double the roughly $670 million it brought in the year before. 

Kraken trade volumes increased from $268 billion in 2023 to $665 billion last year, the company revealed Friday. The exchange is one of several companies segment observers expect could go public in 2025.

BlackRock’s iShares Bitcoin Trust (IBIT) had more than $60 billion in assets under management on Thursday. 

The trust eclipsed $40 billion in net inflows that day — after less than 13 months on the market. 

You may recall the product’s 71-day net inflow streak out of the gate. And that IBIT attracted 21% of BlackRock’s Q1 2024 flows. The ETF’s ~$34 billion of positive net flows in 2024 made up about 5% of BlackRock’s $641 billion total over that span.  

The $60 billion AUM figure puts IBIT at No. 31 on VettaFi’s list of the largest ETFs (albeit with a slightly different total). 

The five ETFs just ahead of it (Nos. 26-30) have been on the market for an average of ~19 years — putting in perspective how fast this product is climbing the charts.

Another stat: IBIT is the 11th-largest iShares ETF out of more than 400. The biggest is the iShares Core S&P 500 ETF (IVV), with roughly $600 billion AUM. That’s good for third on VettaFi’s list — behind only SPY and VOO, which also offer S&P 500 exposure.

So IBIT remains about 10 times smaller than the world’s three largest ETFs. How high on the list could it get? And in what time frame?

Bitwise research head Ryan Rasmussen wanted to avoid naming specific bitcoin ETFs. But he told me he wouldn’t be surprised to see one such product surpass the largest gold ETF — State Street’s SPDR Gold Shares (GLD), with ~$76 billion AUM — within the next year or two. 

IBIT eclipsing GLD would likely put it in the top 20.

But a bitcoin ETF climbing above the biggest broad-based equities ETFs is a much taller task. Those are “a staple” in a majority of portfolios (often commanding an allocation of 20-50%), Rasmussen noted. If included, a bitcoin ETF allocation is typically 1-5%.

“It would take a significant increase in bitcoin's price, increased investor adoption, and upsizing typical bitcoin allocations for a single bitcoin ETF to penetrate the top five or 10 ETFs by AUM,” he said. “All three of those things are possible, but that would be many years down the road.”

— Ben Strack

Happy Friday! It was a busy week with the Fed decision and new inflation data. 

Here’s a recap: 

• After three consecutive cuts, the FOMC hit the pause button this week. Based on Powell’s comments, which we unpacked in yesterday’s edition, it’s looking like the Fed will probably hold rates for a while. Odds of a March cut dipped to 18%, down from 27% a week ago, according to CME’s FedWatch tool. 

• The Fed’s preferred inflationary gauge, the PCE, came in as expected today with a core reading of 2.8%. Excluding food and energy costs, inflation increased 2.6% annually in December, up from 2.4% in November. Spending was up 0.7% over the month, which was slightly higher than projections. 

• The first estimates for Q4 GDP growth came in lower than expected at 2.3%. Annual growth for all of 2024 is projected to be 2.8%. In the final three months of the year, higher consumer spending bolstered economic growth, although persistent inflation could be impacting this figure.

— Casey Wagner

• Alternative asset manager Apollo teamed up with Securitize to tokenize its diversified global credit strategy. Blockworks’ Katherine Ross delved deeper into that move.

• The SEC gave an initial approval needed for Bitwise to launch an ETF that would hold both bitcoin and ether.

• Hedge fund firm Elliott has warned investors that the White House’s support of the crypto industry is fueling assets in the segment with “no substance,” Financial Times reported.  

• Toronto-based Purpose Investments is looking to bring to market the world’s first XRP ETF — matching efforts in the US by firms like Bitwise, Grayscale Investments, CoinShares and WisdomTree. Canadian regulators have previously approved spot bitcoin and ether ETFs in that market before the SEC did the same in the US.

• Grayscale Investments launched a Dogecoin Trust, offering exposure to a peer-to-peer electronic cash system the firm says has “widespread accessibility, affordability and rapid transaction speeds.” This is a private placement investment product, not an ETF.