Coinbase, a US cryptocurrency exchange, released its weekly market commentary last Friday, stating that the macroeconomy remains a key driving factor for cryptocurrency performance. However, Coinbase believes that upcoming catalysts may be driven by regulation, such as the decision on the Ethereum spot ETF, the potential veto of the overturning of SAB 121 regulation by the White House, and the upcoming vote on the FIT21 bill in the US House of Representatives.
Regarding the decision on the Ethereum spot ETF application by the US Securities and Exchange Commission (SEC), Coinbase states that the probability of approval has not substantially changed. In another report released last week, the exchange estimated the approval probability to be close to 30% to 40%. Analysts believe that even if these ETFs are rejected on the first approval deadline of May 23, there is a high possibility of litigation overturning the decision.
According to previous reports by Zombit, the US Senate voted 60 to 38 last week to overturn Accounting Staff Bulletin 121 (SAB 121) issued by the SEC in 2022. However, the White House has expressed that President Biden will veto this voting result. Nevertheless, Coinbase believes that considering the bipartisan support for the bill, there may still be room for this decision to change.
Coinbase also points out that the “21st Century Financial Innovation and Technology Act” (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 the jurisdiction of the SEC and the Commodity Futures Trading Commission (CFTC), and outlines disclosure requirements for digital asset developers, which will provide a clearer path for compliance. In addition, potential stablecoin legislation, such as the “Lummis-Gillibrand Payment Stablecoin Act,” may accelerate the adoption cycle of stablecoins.
In terms of other driving factors, Coinbase states that the stagnation of retail sales last month leads them to believe that the economy may be reaching its peak. Analysts believe that two 25 basis point rate cuts in federal funds futures starting from September 2024 seem appropriate, as well as the cyclical decline of the multilateral US dollar index.
Coinbase also mentions that all 13F holdings reports disclosed in the first quarter of this year show that traditional conservative funds have begun holding Bitcoin spot ETFs, such as the State of Wisconsin Investment Board (SWIB). The exchange believes this is a “positive signal for Bitcoin’s acceptance in diversified investment portfolios.” Data shows that a total of 937 institutions hold Bitcoin spot ETFs.
Coinbase adds that FTX exchange’s future customer repayments and the upcoming US election are also potential catalysts. Documents submitted by FTX to the court 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.
