🪙 Ether makes its ETF debut

What’s going on here?

Alphabet announced better-than-expected results on Tuesday, enough to keep investors happy but shy of its “magnificent” moniker.

What does this mean?

More than half of Alphabet’s money comes from Google Search, so ever since AI stormed onto the scene, investors have been nervous about potential disruptions to the firm’s bread and butter. Now, the company is finally putting some of those fears to bed: revenue from search grew by a better-than-expected 14% last quarter compared to a year earlier, as the firm waved some AI magic over its favorite child. Meanwhile, Google Cloud – now the growth machine as search slows – saw sales rise by a better-than-expected 29%. What’s more, the segment, which was in the black for the first time in 2023, saw its profit margin jump to 11%. That’s not small potatoes – until you compare it to Amazon Web Services’ 38%.

Why should I care?

Zooming in: Wizn’t interested.

Amazon and Microsoft have left Alphabet’s cloud business in the dust. And to catch up, the company has been looking to add more features. That’s why it was angling to buy cloud cybersecurity firm Wiz for a hefty $23 billion, in what would’ve been Alphabet’s biggest acquisition ever. But the startup rejected those overtures this week, giving the firm the cold shoulder and flirting with a public listing instead.

For markets: David versus Goliath.

Alphabet and other huge firms have seen their share prices shoot higher over the past few years, while small-fry stocks have underperformed. But that gap began to narrow slightly this month after investors started banking more heavily on interest rate cuts this year. It’s a game-changer: little firms tend to carry lots of short-term or variable-rate debt, so they’re set to benefit greatly from lower borrowing costs. On the flip side, chunky companies – especially tech giants – can expect to see the interest income they make on their enormous cash piles slip.

What’s going on here?

The first spot ether ETFs began trading in the US on Tuesday, hot on the heels of a similar crop of bitcoin ones.

What does this mean?

Put simply, these funds give investors a regulated way to invest in a cryptocurrency – in this case, Ethereum’s digital coin, ether – through their brokerage accounts. That lets folk trade crypto like stocks, without the hassle of digital keys or wallets. So it’s now super easy for Americans and big-money investing houses alike to trade ether – the world’s second-biggest digital asset. It’s a sizable step, marking the coin’s stamp on US finance, not long after the January debut of spot bitcoin ETFs. And the fund issuers appear ready for some serious competition: they’re offering investors low fees – or even none initially – to try to grab some attention.

Why should I care?

Zooming out: Moths to a flame.

Spot bitcoin funds became an investor magnet when they launched, drawing money faster than any ETF ever. And because of the nature of these funds – the financial institutions providing them buy the underlying crypto one-for-one to match the ETF shares – bitcoin shot up 58% in just two months. Analysts don’t expect the same rocket launch for ether, though: they’re predicting a potential 24% rise, as the market is only about a quarter the size of bitcoin’s. Plus, ether didn’t get the trophy for moving first – and it doesn’t have bitcoin’s “store of value” reputation, either.

The bigger picture: Wild rides.

Crypto is notorious for its sweet highs and terrifying lows: that’s one of its downsides. What’s more, unlike stocks, bonds, or even real estate, most cryptocurrencies don’t produce cash flow – and because of that, they’re harder to value objectively. That’s why some pros recommend keeping your crypto allocation on the small side, so you can profit from a rise but not suffer too much from a fall.