THE COIN STREET JOURNAL
Market News - May 24th 2024
BITCOIN REVIEW
The price of Bitcoin (BTC) gained significant momentum in 2021 due to increased institutional adoption but faced challenges in 2022 due to regulatory and environmental issues. However, in 2023, Bitcoin experienced a remarkable surge, with its price increasing by 157%. This bullish trend extended into 2024, with Bitcoin surpassing the $60,000 mark in early March and reaching over $71,000 by May 21.
Despite this strong performance, Bitcoin’s price faced some pressure on May 22, 2024, due to concerns from a Federal Reserve official about inflation and hesitancy to lower interest rates. Consequently, Bitcoin’s price slightly dropped to just above $69,000. Nevertheless, market enthusiasts remain optimistic, predicting the bullish trend will continue if the price stays above this level.
Bitcoin’s price has already risen by more than 50% in 2024, outpacing equities and bonds. This growth is largely attributed to the approval of 10 spot Bitcoin ETFs in January, which brought in a net inflow of $7 billion by the end of February, as confirmed by Morningstar Direct.
These regulatory approvals have allowed both retail and institutional investors to gain exposure to Bitcoin through brokerage accounts, solidifying its status as a credible asset class. This legitimacy is expected to further drive Bitcoin’s price upward. Additionally, the potential approval of spot ether ETFs is anticipated to bolster Bitcoin’s rally, as the SEC has requested exchanges to update their filings.
Bipartisan support in the House of Representatives recently led to the passage of a significant crypto bill, with nearly all Republicans and 71 Democrats voting in favor. This shift in Washington’s stance, including that of the Biden administration, is a positive signal for the future of Bitcoin and other digital assets.
Given the favorable conditions for Bitcoin, investors are advised to monitor stocks that could benefit from its continued bullish run. Notable companies include Block, Inc., Coinbase Global, Inc., and NVIDIA Corporation.
ETHER ETFs APPROVAL FOR LISTING
\Bitcoin (BTC) and ether (ETH) prices declined in the past 24 hours despite several ether exchange-traded funds (ETFs) receiving approval for listing on U.S. exchanges. This drop followed a period of significant anticipation and a surge in ether’s value.
Ether’s price fell by 4% since the ETF approval, according to CoinGecko data. Previously, it had increased by 20% over a week amid expectations of the ETF approval. The CoinDesk 20 index, which tracks major tokens, decreased by 4.5% over 24 hours, and the total crypto market cap fell by 2.9% to $2.5 trillion.
Alex Kuptsikevich, a senior market analyst at FxPro, explained that the decline in Ethereum’s price following positive news is typical of a “buy the rumors, sell the facts” reaction by speculators. He suggested that the price might pull back to around $3000, a significant consolidation area where institutional investors could start positioning in ETFs.
Kuptsikevich drew parallels with the January Bitcoin ETF approval, which saw Bitcoin’s price drop by 19% in the following two weeks before a notable rebound. This pattern reflects market behavior in response to major regulatory milestones.
On Thursday, the U.S. Securities and Exchange Commission (SEC) approved key regulatory filings related to ether ETFs, marking a historic moment for the second-largest cryptocurrency. However, these ETFs are not yet cleared to trade, as the SEC still needs to approve the S-1 filings, which would allow investors to purchase them.
The SEC’s approval covered documents for eight ETFs from various firms including VanEck, Fidelity, Franklin, Grayscale, Bitwise, ARK Invest 21Shares, Invesco Galaxy, and BlackRock. These ETFs are set to be listed on the Nasdaq, NYSE Arca, and Cboe BZX exchanges.
If the ETFs receive trading approval, a significant influx of institutional capital is anticipated. Standard Chartered has projected potential inflows of up to $45 billion in the first 12 months following the approval.
Despite the recent price drop, some traders expect ether to rally by over 60% in the coming months. This optimism is fueled by a notable increase in both futures and spot buying demand for ether in the past week.
Overall, the crypto market’s reaction to regulatory developments and ETF approvals underscores the dynamic nature of investor sentiment and market movements in response to significant events. The long-term impact of these approvals on ether’s price and the broader market remains to be seen.
The potential for substantial institutional investment through these ETFs could lead to increased stability and growth in the crypto market, pending further regulatory approvals and market responses.
CRYPTOCURRENCY MARKET SEES CORRECTION
The cryptocurrency market experienced a sharp correction in the early hours in the US, leading to a significant $120 billion liquidation. Major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) saw substantial price declines. This downturn contributed to a 2.5% drop in the overall market capitalization, now standing at $2.52 trillion.
Bitcoin led the decline with its price dropping over 3%, trading at $67,241. Ethereum and Ripple followed with XRP seeing a 1.73% decline to $0.5188. This widespread sell-off has caused increased volatility in the broader cryptocurrency market, reflecting the bearish sentiment.
On-chain metrics showed a notable increase in the inflow of cryptocurrencies to exchanges, indicating heightened selling pressure. This trend suggests that more investors are ready to liquidate their holdings, which typically precedes market corrections. The increased supply on exchanges often drives prices lower, worsening the current market downturn.
The health of the crypto market is further underscored by declining engagement and activity. Metrics such as active addresses, transaction volumes, and overall network activity have all shown signs of decline. This reduced activity points to waning investor interest and engagement within the crypto ecosystem.
Adding to the negative sentiment, the release of the Federal Open Market Committee (FOMC) Minutes influenced traders’ cautious approach. Concerns about inflationary pressures expressed by many Fed officials suggest a potential delay or reduction in the number of expected rate cuts this year, affecting market outlooks.
Regulatory news has also played a role in the market’s decline. The SEC has maintained a conservative stance on the recently approved crypto bill by the House of Representatives. SEC Chair Gary Gensler highlighted the agency’s readiness for dialogue but stressed the importance of enforcing laws to ensure token operators provide necessary disclosures to investors.
Additionally, the S&P Global Purchasing Managers’ Index (PMI) report indicated robust economic growth in the US, the fastest in two years. This strong economic performance led traders to adjust their expectations regarding interest rate cuts, adding further pressure on Bitcoin and other digital currencies.
Overall, the combination of regulatory concerns, inflation fears, and robust economic growth has led to a significant market correction. The increased selling pressure and declining engagement underscore the current challenges facing the cryptocurrency market, contributing to the sharp $120 billion liquidation.
FIT21 PASSED: BIG WIN FOR THE CRYPTO INDUSTRY
The U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21) with a vote of 279-136, marking a significant legislative win for the crypto industry. The bill received substantial support from House Democrats, indicating a notable bipartisan effort.
This legislative milestone represents the first major crypto bill to clear a chamber of Congress, signifying a potential shift in the regulatory landscape for digital assets in the U.S. However, the bill’s future in the Senate remains uncertain, as there is no corresponding bill and committee efforts on crypto regulation have been limited.
Representative Josh Gottheimer (D-N.J.), a key Democrat supporter, highlighted the need for “rules of the road” for the crypto industry, calling the legislation “well-reasoned, thoughtful, bipartisan.” Despite opposition from the White House and key Democratic figures like Rep. Maxine Waters (D-Calif.), 71 Democrats joined 208 Republicans in voting for the bill.
President Joe Biden opposed the bill, though he did not threaten a veto. SEC Chair Gary Gensler also strongly criticized the legislation, arguing that it was unnecessary and could undermine existing securities regulations, reflecting the broader regulatory resistance.
The FIT21 bill aims to establish a comprehensive regulatory framework for the U.S. crypto markets. It includes consumer protection measures and designates the Commodity Futures Trading Commission (CFTC) as the primary regulator for digital assets, clarifying the classification of crypto tokens as either securities or commodities.
Rep. Maxine Waters argued that the bill would essentially reward crypto businesses that have previously circumvented securities laws. She contended that these companies have profited unlawfully from issuing or facilitating the trading of crypto securities, and the bill would legitimize these activities.
Prior to the vote, the House debated several amendments to the bill. Rep. Greg Casar’s (D-Texas) proposal to reduce a crowdfunding exemption from $75 million to $5 million was defeated, while other amendments by Reps. Brittany Pettersen (D-Co.), Ralph Norman (R-S.C.), and Scott Perry (R-Pa.) were adopted.
Despite the House’s approval, the U.S. still lags behind other countries in crypto regulation. The passage of FIT21 is a step forward, but implementing comprehensive oversight remains a complex challenge that requires further legislative and regulatory efforts.