U.S. cryptocurrency exchange Coinbase said in its weekly market commentary released on Friday (17th) that macroeconomics remains a key driver of cryptocurrency performance, but “we believe the main upcoming catalyst may be regulatory-driven.” , such as the Ethereum spot ETF ruling, the White House’s potential veto to overturn the SAB 121 regulations, and the upcoming U.S. House of Representatives vote on the FIT21 bill.
Regarding the U.S. Securities and Exchange Commission’s (SEC) ruling on the Ethereum spot ETF application, Coinbase said there has been no material change in the chances of approval. In a separate report released last week, the exchange estimated the chances of approval to be closer to 30% to 40%, and analysts believe that even if the ETFs are rejected on the first approval deadline on May 23, related lawsuits overturn The likelihood of this ruling is also high.
According to previous reports by Zombit, the U.S. Senate voted 60 to 38 last week to overturn the SEC’s Accountant Bulletin 121 (SAB 121) issued in 2022. However, the White House has stated that U.S. President Biden will veto the results of the vote. Still, Coinbase believes there may be room for change in the decision, given the bill’s bipartisan support.
Coinbase also pointed out that the " Financial Innovation and Technology Act for the 21st Century " (FIT21) may be voted on in the House of Representatives later this month. The bill mainly provides a clear process to determine which digital asset transactions fall under SEC and commodity futures trading. The CFTC’s jurisdiction also outlines disclosure requirements for digital asset developers, which will provide a clearer path to compliance. Additionally, potential stablecoin legislation could accelerate the adoption cycle of stablecoins, such as the Lummis-Gillibrand Payments Stablecoin Act .
Other drivers
In terms of the macro environment, Coinbase said that the lull in retail sales last month prompted them to believe that the economy may be peaking, and analysts believe that two 25 basis point interest rate cuts from September 2024 on Fed Funds Futures appear to be Fittingly, so does the cyclical move lower on the multilateral U.S. Dollar Index.
Coinbase also mentioned that some traditional conservative funds recently disclosed their holdings of Bitcoin spot ETFs in the 13 F report, such as the Wisconsin Investment Board (SWIB) , believing this to be "a positive sign that Bitcoin is accepted in a diversified investment portfolio." . Coinbase added:
“Nonetheless, these filings are not a measure of current market conditions, and not all positions are created equal. For example, we believe the positions in some hedge funds may be the spot portion of a basis trade. Additionally, the 45-day reporting period means Positions may have changed significantly during this period. Nonetheless, the breadth of exposure reported by investment advisors to Bitcoin spot ETFs is a promising sign of increasing adoption of cryptocurrencies by traditional finance, and we believe ETFs are. Inflows will remain strong net positive for the rest of the year."
Coinbase also mentioned in the report that the FTX exchange’s future repayments to customers and the upcoming U.S. election are also potential catalysts. FTX's court filings show that the company expects to have $15.5 billion to $16.3 billion available for distribution to creditors, and some traders expect about half of that money to be reinvested into the cryptocurrency market.
