Last Friday (17th), the American cryptocurrency exchange Coinbase released its weekly market commentary, stating that the macroeconomic environment remains a key driver of cryptocurrency performance, but “we believe that upcoming major catalysts may be driven by regulation”, such as the decision on the Ethereum spot ETF, the potential veto by the White House of overturning SAB 121 regulations, and the upcoming vote in the US House of Representatives on the FIT21 bill.
Regarding the Securities and Exchange Commission (SEC) decision on the Ethereum spot ETF application, Coinbase stated that the probability of approval has not substantially changed. In another report released by the exchange last week, the estimated probability of approval was close to 30% to 40%, and analysts believe that even if these ETFs are rejected on the first approval deadline of May 23, there is a high possibility of related litigation overturning this decision.
According to previous reports by Zombit, the US Senate voted 60 to 38 last week to overturn the SEC’s Staff Accounting Bulletin 121 (SAB 121) issued in 2022. However, the White House has stated that President Biden will veto this voting result. Nevertheless, Coinbase believes that given bipartisan support for the bill, there may still be room for change in this decision.
Coinbase also pointed out that the “21st Century Financial Innovation and Technology Act” (FIT21) may be voted on in the House of Representatives later this month. This bill mainly provides a clear process to determine which digital asset transactions fall within the jurisdiction of the SEC and the Commodity Futures Trading Commission (CFTC), and outlines disclosure requirements for digital asset developers, providing a clearer path for compliance. In addition, potential stablecoin legislation may accelerate the adoption cycle of stablecoins, such as the “Lummis-Gillibrand Payment Stablecoin Act”.
In terms of other driving factors, Coinbase stated that the stagnation of retail sales last month led them to believe that the economy may be peaking. Analysts believe that two 25 basis point rate cuts in Federal Funds Futures from September 2024 seem appropriate, and the cyclical decline in the multilateral US Dollar Index supports this.
Coinbase also mentioned that all 13F holding reports disclosed in the first quarter of this year show that traditional conservative funds have started to hold Bitcoin spot ETFs, such as the State of Wisconsin Investment Board (SWIB), which the exchange believes is a “positive signal of Bitcoin being accepted in diversified investment portfolios”. Data shows that a total of 937 institutions hold Bitcoin spot ETFs.
Coinbase added:
In the report, Coinbase also mentioned that future repayments to customers by the FTX exchange and the upcoming US elections are potential catalysts. Documents submitted to the court by FTX indicate that the company expects to have $15.5 billion to $16.3 billion available for distribution to creditors, and some traders anticipate that about half of the funds will be reinvested in the cryptocurrency market.