Weekly Pulse #11: May 13th – 19th

Mark Vermeulen, 5 min read
Last Updated: 19 May, 2024

Crypto Market Weekly Recap

Notable Bitcoin ETF Holdings Boost Market Sentiment

Several major institutional investors substantially increased their Bitcoin exchange-traded fund (ETF) holdings last week, helping drive a rally in Bitcoin’s price.

Millennium Management, one of the world’s largest hedge funds with over $50 billion in assets under management, disclosed $2 billion worth of holdings in the BlackRock iShares Bitcoin Trust ETF (IBIT) and the Grayscale Bitcoin Trust. Meanwhile, Bracebridge Capital, a hedge fund managing endowments for Yale and Princeton, announced $262 million in holdings of the 21Shares Bitcoin ETF and $81 million in IBIT. Point72, the $34 billion hedge fund run by New York Knicks owner Steven Cohen, held $77.5 million worth of shares in the Fidelity Bitcoin ETF.

These large purchases reflect growing institutional demand for Bitcoin and helped drive a 10% rally in its price last week, breaking above $67,000 on Friday. Bitcoin’s correlation with tech stocks also reached new highs, highlighting its status as a high growth asset. As ETF holdings continue to climb, Bitcoin is becoming further integrated into broader financial markets.

Senate Votes to Reverse SEC Crypto Accounting Rule

In a rare bipartisan move, the U.S. Senate voted 60-38 this week to overturn a controversial SEC accounting rule that required firms to record customer digital assets as liabilities instead of as traditional company assets. The SEC argues this stricter accounting prevents inflating balance sheets with volatile crypto assets. However, the rule created significant accounting headaches for crypto companies.

The Senate resolution to repeal this rule now heads to President Biden, who has threatened to veto it. However, Congress could override a presidential veto with a two-thirds vote. The strong bipartisan Senate majority reflects growing legislative support for developing clear crypto regulations, challenging the SEC’s aggressive crypto stances. How the administration responds could shape future crypto policy battles.

New Vanguard CEO’s Crypto Views Stir Speculation

The recent appointment of Salim Ramji as CEO of Vanguard, the world’s second largest asset manager, has stirred excitement about potential crypto offerings. Ramji previously headed BlackRock’s ETF division during the launch of its blockbuster Bitcoin ETF.

In contrast, outgoing Vanguard CEO Tim Buckley said the firm would avoid Bitcoin and crypto, which he claimed have no underlying value. However, Ramji has publicly praised crypto’s potential. This has led to speculation that Vanguard may reevaluate its crypto stance under his leadership.

Nonetheless, Ramji recently downplayed suggestions Vanguard itself will launch a spot Bitcoin ETF soon. Ultimately deeds speak louder than words. If Vanguard fails to participate in the accelerating institutional crypto adoption, it risks falling behind rivals like BlackRock which continue to expand their crypto presence. With the market increasingly validating Bitcoin’s role, Vanguard faces growing pressure to chart a crypto course compatible with its passive investment philosophy.

CME Plans Spot Bitcoin Offering

The CME Group, the leader in Bitcoin futures trading, is reportedly planning to launch spot crypto trading, according to the Financial Times. The move would allow futures traders to access both spot and derivatives markets on one platform.

While the spot offering may siphon some volumes from major exchanges like Binance and Coinbase, it could also spur more institutional interest given CME’s reputation. Overall, additional spot market participants should lift prices and volumes marketwide.

Ethereum ETF Hopefuls Await SEC Decision

The SEC is slated to rule on several Ethereum ETF applications next week. While approval looks improbable, Grayscale’s ETHE Trust has inked a deal with BNY Mellon to serve as transfer agent should a fund get the green light.

Sentiment toward Ethereum has grown increasingly gloomy amid market share gains for rival layer 1s like Solana. However, Ethereum remains the dominant hub for DeFi and NFT activity while upgrades continue apace. An ETF could spur a swift reversal in negative optics.

Chainlink recently completed a pilot project with major US banks and financial institutions like JPMorgan and BNY Mellon to test bringing fund data on-chain. The goal was to accelerate the tokenization of assets like stocks and bonds. The pilot demonstrated that putting structured fund data on multiple blockchains can enable useful applications like tokenized investment funds. Chainlink’s technology for securely connecting off-chain data to blockchains played a key role. The successful test shows potential for expanding tokenization more broadly in the future, across more use cases and blockchains. This advances Chainlink’s capabilities in the emerging field of tokenization and integrating traditional finance with crypto.

Chainlink completed an important pilot to showcase how its blockchain oracle services could facilitate asset tokenization and integration with legacy finance. This further establishes Chainlink’s leadership in the decentralization and tokenization of real-world assets.

Legacy Markets

European Equities Decline As Fed Rate Cut Outlook Dims

European stocks suffered losses last week as expectations for aggressive Federal Reserve rate cuts diminished, dampening risk appetite. The Stoxx 600 index fell 0.2%, dragged down by interest rate-sensitive sectors such as technology and real estate. US stock futures hovered near record highs, showing resilience in the face of shifting monetary policy expectations.

Luxury group Richemont bucked the trend, rising after appointing Nicolas Bos as its new CEO. Meme stocks GameStop and AMC Entertainment staged a comeback after significant losses earlier in the week. Reddit shares surged on news of a partnership with artificial intelligence leader OpenAI.

Caution Reigns As Markets Reassess Fed Policy Path

Cautious sentiment prevailed on Friday as investors recalibrated their predictions for Federal Reserve policy. Several central bank officials, including Christopher Waller, Neel Kashkari, and Mary Daly, advocated for maintaining higher borrowing costs to combat stubborn inflation. Markets now anticipate only one Fed rate cut in 2024, a marked shift from previous expectations.

In Europe, European Central Bank Executive Board member Isabel Schnabel warned against consecutive interest rate cuts in June and July. Despite this, swap traders continued to price in three ECB rate reductions this year, with the first expected in June.

China Economic Woes Weigh On Asian Markets

Asian markets retreated amid mounting signs of economic weakness in China, the world’s second-largest economy. The Japanese yen weakened against the US dollar after the Bank of Japan maintained its bond-buying program, diverging from the global trend of monetary tightening.

Oil Set For Weekly Gain As Copper Squeeze Eases

Crude oil prices were poised for a modest weekly advance, supported by supply constraints and geopolitical tensions. In the metals market, the record squeeze in New York copper futures showed signs of easing, providing relief to market participants.

Investors Eye Eurozone Inflation, US Economic Data

Looking ahead, market participants will closely monitor key economic events:

  • Eurozone Consumer Price Index (CPI) data, due Friday, will provide insights into the region’s inflation trajectory and potential ECB policy response.
  • The US Conference Board Leading Economic Index, also scheduled for Friday, will offer clues about the health of the world’s largest economy.

Market Movers: A Snapshot

Stocks:

  • Stoxx 600: -0.3%
  • S&P 500 futures: Little changed
  • Nasdaq 100 futures: Little changed
  • Dow Jones Industrial Average futures: Little changed
  • MSCI Asia Pacific Index: -0.1%
  • MSCI Emerging Markets Index: Little changed

Currencies:

  • Bloomberg Dollar Spot Index: +0.2%
  • Euro: -0.2% to $1.0843
  • Japanese yen: -0.3% to 155.90 per dollar
  • Offshore Chinese yuan: -0.1% to 7.2329 per dollar
  • British pound: -0.1% to $1.2651

Cryptocurrencies:

  • Bitcoin: +1.3% to $66,156.66
  • Ether: +3% to $3,025.1

Bonds:

  • US 10-year Treasury yield: +1 basis point to 4.39%
  • German 10-year yield: +3 basis points to 2.49%
  • UK 10-year yield: +3 basis points to 4.11%

Commodities:

  • Brent crude: +0.1% to $83.36 a barrel
  • Spot gold: +0.3% to $2,383.98 an ounce

Senate Deals Blow To SEC Crypto Rule, Biden Veto Looms

The cryptocurrency industry scored a political victory as the Democrat-controlled Senate passed H.J. Res 109, a resolution disapproving of the Securities and Exchange Commission’s contentious SAB 121 crypto accounting rule. The measure now heads to President Biden’s desk, setting the stage for a potential veto showdown.

The Biden administration has signaled its intention to veto the resolution, despite growing bipartisan support for the crypto sector. With midterm elections on the horizon, the decision could have significant implications for winning over crypto-friendly voters.

Notably, 12 Democratic senators broke ranks to support the resolution, highlighting the shifting political landscape around digital assets. The current Senate composition stands at:

  • Democrats: 48 seats
  • Republicans: 49 seats
  • Independents: 3 seats
  • Total: 100 seats

Mark Vermeulen

A native of the Netherlands with a degree in finance, Mark has emerged as an avid crypto enthusiast and expert. His dedication to blockchain technology and bitcoin adoption has made him the driving force behind the Dutch content of Ecoinomy. Mark's adventure began during college, where his passion for decentralized finance quickly caught his eye. His ability to simplify complex concepts around crypto has earned him prestige among Dutch investors and far beyond.