Weekly Pulse #12: May 20th – 26th

Mark Vermeulen, 4 min read
Last Updated: 27 May, 2024

Crypto Market Recap

Ethereum ETFs Receive Conditional Approval from SEC

Last week brought a surprise turn of events regarding the hotly anticipated spot Ethereum (ETH) exchange-traded funds (ETFs). After months of pessimism, the odds for approval suddenly increased when rumors began circulating that the Securities and Exchange Commission (SEC) had opened meaningful dialogues with proposed ETF issuers.

The improved prospects caused ETH prices to rally leading up to the expected decision date. However, prices dumped 8% when the 4 PM EST deadline passed without an announcement. Just over an hour later, the news finally arrived: the SEC had conditionally approved the listing rule changes for all proposed spot ETH ETFs, spurring a 4% price bounce.

ethereum etf

Despite hopes of a more emphatic rally, traders had likely already repriced approval odds earlier in the week. Furthermore, the approval only covered exchange rule changes, not the registration statements required to actually launch the ETFs. And because the approvals came from SEC staff under “delegated authority” due to a commissioner’s absence, they technically could still be revoked.

Thankfully, experts dismissed concerns about the flimsiness of the approvals, noting that delegated decisions are common and anticipating no issues with the pending registrations. Still, until the registration statements receive clearance, it’s premature to claim outright approval. Nevertheless, the regulatory progress definitively points towards eventual approval.

Approval Affirms Ether’s Non-Security Status

The move confirms Ether as a non-security commodity, a transition enabled by the network’s decentralization over time. This gives a blueprint for other crypto assets to achieve the same status and become eligible for ETF listings.

However, Bitcoin and Ether remain the only two assets designated as commodities by the Commodity Futures Trading Commission (CFTC). A key factor in Ether’s ETF approval was the years of price correlation data between the CME futures and spot markets. This data enables sufficient market surveillance to satisfy SEC requirements.

No other crypto assets currently have regulated futures trading in the US. So despite pending applications, additional ETF approvals may take years to materialize.

New Legislation Defines Digital Asset Oversight

Crypto regulation made progress in Congress as well last week. The bipartisan Financial Innovation and Technology (FIT) for the 21st Century Act passed the House with White House support. The bill provides definitive guidance on which agencies regulate different types of crypto assets.

It grants the CFTC sweeping authority over “decentralized digital assets” that meet specific criteria. Worryingly, it also empowers the CFTC with exclusive regulatory control over related spot markets—a vast expansion of their traditional domain.

So while the legislation should add clarity around assets eligible for futures listings and ETFs, the broad authority it confers upon the CFTC raises concerns. With Ether seemingly blazing a trail towards greater legitimacy, regulators must take care not to snuff out financial innovation in their quest for oversight.

Legacy Markets Summary

All Eyes on Inflation Data

With inflation remaining stubbornly high, upcoming CPI releases will be closely watched. Preliminary European CPI and Tokyo CPI are due this week, while the U.S. April PCE data will provide insight into the Fed’s rate hike path. Any significant deviation from estimates could substantially impact markets and Fed projections. The central bank’s Beige Book will also give a timely overview of the economy.

Earnings

Salesforce, Costco Third-quarter earnings remain in focus, with companies like Salesforce and Costco announcing results. Despite an uncertain spending environment, Salesforce anticipates an 11% revenue increase, driven by AI integration. Costco’s 7.9% projected revenue growth reflects resilient consumer discretionary expenditure. Meanwhile, the TD Securities TMT Conference will convene sector leaders, overlapping with CoinDesk’s Consensus crypto event.

UK Politics: Conservatives vs. Labour

In a surprise move, PM Rishi Sunak has called a general election for July 4th, contrasting the Conservatives’ economic stability record against Labour’s “no plan” approach. While Sunak touts Britain’s economic progress, Labour leader Keir Starmer promotes change to support working individuals, improving public services despite financial limitations. The accelerated timeline caught many off guard, with Sunak capitalizing on declining inflation.

Winners & Losers: Stock Movers

Discount Retailer Ross Stores Surges

Ross Stores stock jumped nearly 8% last week after stellar Q1 results, posting earnings per share of $1.46 on $4.86 billion revenue. The numbers exceeded expectations, reflecting resilient non-essential consumer expenditure.

Defense Giant Booz Allen Rallies

Booz Allen Hamilton shares climbed 4% following better-than-expected fiscal Q4 financials. Adjusted EPS reached $1.33 on $2.77 billion revenue. The company continues to benefit from robust defense spending in the current geopolitical climate.

Uggs Maker Deckers Outdoor Surges

Deckers stock surged nearly 14% last week after sales and profit in its fiscal Q4 trumped estimates. The company’s diverse product range and pricing power helped it overcome inflationary pressures.

Workday Falls on Guidance Miss

In contrast, Workday shares plunged over 15% as its Q2 subscription revenue outlook slightly trailed expectations. The company predicted softer sales growth versus recent quarters amidpatchy enterprise software spending.

TurboTax Parent Intuit Declines on Forecast`

Intuit stock dropped around 8% last week after the TurboTax maker predicted weaker-than-expected FQ4 adjusted earnings per share. Uncertainty around tax filing activity has tempered Intuit’s near-term outlook.

Sector & Commodity Roundup

Real Estate Falters on Rate Fears

After four straight weeks of gains, real estate stocks dropped nearly 4% last week as hopes for potential rate cuts diminished. Hawkish Fed speak hinted that benchmark rates could remain elevated for longer to tame inflation.

Copper Stabilizes Following Steep Drop

Copper prices stabilized last week after facing intense pressure from Chinese factories resisting elevated costs, combined with hawkish Fed rate hike commentary. The industrial metal had posted its largest pullback in almost two years earlier.

Oil Lingers Near Three-Month Lows

Crude oil benchmarks hovered around three-month lows, weighed down by demand uncertainty and reduced geopolitical tensions. OPEC+ is still expected to extend output cuts when it meets June 2nd to support prices despite adequate global supplies.

Gold Scales New Highs

Gold prices touched fresh record highs last week, driven by robust Asian demand and central bank purchases. Money managers are the most bullish on the precious metal in over four years as inflation hedge appeal persists.

What Lies Ahead

Salesforce Braces for Slowdown

Salesforce’s upcoming earnings will offer clues on enterprise software spending traction as firms tighten belts amid uncertainty. While the company forecasts reasonable top-line growth, wider economic risks cloud the outlook.

Costco Eyes Consumer Resilience

Costco’s quarterly figures will provide key signals on consumer discretionary expenditure. The retailer expects solid membership expansion, but margin pressures from fuel and labor costs persist.

OPEC+, BP Meeting Eyed

The upcoming OPEC+ meeting will likely extend output cuts to stabilize crude oil markets, although BP’s stock still dropped nearly 2% on demand concerns. Tighter monetary policies also pressure oil and integrated energy stocks like BP.

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.