Weekly Pulse #5: April 1st – 7th

Mixed Signals Ahead of Next Bitcoin Halving

With the next halving of bitcoin less than two weeks away, it is worth looking at what bitcoin’s price has done after the three previous halvings. Past performance does not guarantee future results, and this event has some unique aspects, as discussed previously. Still, the history shows large BTC price gains in the year after past halvings:

Halving #1 – November 2012

• Block reward cut from 50 to 25 bitcoins
• Price then: $13
• Peak in next year: $1,152

Halving #2 – July 2016

• Block reward reduced from 25 to 12.5
• Price then: $664
• Next year peak: $19,511

Halving #3 – May 2020

• Reward lowered from 12.5 to 6.25
• Price then: $9,734
• Next year peak: $69,000

Halving #4 – April 2024

• Reward drops from 6.25 to 3.125
• Current price: ~$70,000
• Next peak: TBD

The current price before this next halving is far above the peak from the year before for the first time. This could signal the bitcoin price cycle is progressing faster or could reach an even higher peak this time around. The increased Wall Street and institutional adoption this cycle adds to the chance of extending higher.

Major Exchange Coinbase Wins Court Case

In a big victory, crypto exchange Coinbase won a key legal battle related to secondary trading of crypto assets. The appeals court ruled that such trading on Coinbase’s platform does not violate securities laws. The decision turned on the court’s reading of Coinbase’s user contracts.

Some key points:

• This was not against the SEC but a revived 2021 consumer lawsuit
• No ruling that assets like Solana or Cardano are not securities
• The case was about secondary trading, not the assets themselves
• Positive sign for Coinbase’s battle with the SEC over similar issues
• But consult professionals as I’m not a legal expert!

The market impact remains to be seen, but this is a major boost for Coinbase in its legal fights.

More Banks Join BlackRock’s Bitcoin ETF

BlackRock added five new authorized participants to its bitcoin trust ETF last week, including Goldman Sachs, Citadel, Citi, UBS and ABN AMRO. This expands the number of firms helping create and redeem ETF shares to nine, supporting greater liquidity.

Interestingly, Goldman’s CIO recently said crypto has no value and is not an asset class. Yet their actions show otherwise. As the ETF adds more bitcoin, it could flip Grayscale’s trust if outflows there persist.

Solana Battles Severe Congestion

Solana experienced major congestion last week, with approximately 75% of transactions failing. The new proof-of-work token Ore contributed to the issues. However, various factors caused the widespread congestion. Solana founder Anatoly and Helius Labs co-founder Mert acknowledged the network-wide problems on Twitter. They cited Solana’s QUIC feature as a significant culprit. In summary, fixes will come but require time to implement fully.

Legacy Markets Weekly Recap

Stocks Rally on Powell Comments, Commodities Surge

Stocks and bonds gained ground this week after reassurances from Federal Reserve Chair Jerome Powell that interest rate cuts are still on the table for this year. His comments suggested that recent higher-than-expected inflation readings have not drastically altered the Fed’s outlook.

Powell’s remarks helped lift European and U.S. stock futures, while also contributing to a decline in Treasury yields from last week’s four-month peak. The Bloomberg Dollar Spot Index also fell in response.

While some recent economic data has come in strong, the Fed still seems poised to move towards an easing stance. However, futures markets indicate lingering uncertainty around the timing and magnitude of eventual rate cuts.

There are still risks from the high March private payroll numbers, which could foreshadow equally robust figures in the government’s upcoming nonfarm payrolls report. Strong job growth could complicate the Fed’s plans for rate cuts.

Notable is Atlanta Fed President Raphael Bostic’s prediction of just one 25 basis point rate cut in the fourth quarter. Meanwhile, several other Fed officials are slated to speak soon, possibly offering additional clarity on the central bank’s policy direction.

In Europe, bond yields moved lower in anticipation of the European Central Bank initiating policy easing before the Fed, with expectations for several rate cuts by year-end.

On the commodities front, rising oil, copper and gold prices are stoking global inflation concerns. Tight supplies and healthy demand are driving gains across the complex. European stocks, especially mining shares, benefited from the jump in commodity prices.

In the U.S., tech stocks showed resilience following a recent earthquake in Taiwan, as major semiconductor suppliers reported no major damage. Chipmakers helped lift the Nasdaq.

Key events this week:

• Eurozone Services PMI, PPI on Thursday
• U.S. Jobless Claims, Challenger Job Cuts on Thursday
• Fed speakers Loretta Mester, Alberto Musalem, Thomas Barkin, Patrick Harker, Austan Goolsbee on Thursday
• ECB Account of March Policy Meeting on Thursday
• Eurozone Retail Sales on Friday
• U.S. Jobs Report on Friday
• Fed speakers Michelle Bowman, Thomas Barkin, Lorie Logan on Friday