Category: Cryptocurrency

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Cryptocurrency is quickly becoming an election issue, with Ethereum (ETH-USD) emerging as a significant beneficiary. From Monday to Tuesday, Ether surged 21%, marking its best two-day performance since January 2021.

This rally occurred despite initial concerns about the prospects for the next big crypto surge. The government’s hesitation to approve a suite of spot Ether ETFs had dampened enthusiasm. This hesitation contrasted with the excitement over Bitcoin ETFs, which had revitalized the crypto market late last year and sustained its momentum into this year.

The general expectation was that widely available crypto ETFs would facilitate crypto adoption among latecomers, allowing less crypto-savvy investors to allocate a “responsible” portion of their 401(k)s to these new ETFs. However, Jim Bianco of Bianco Research cast doubt on this theory, especially with the Securities and Exchange Commission showing no signs of approving spot Ether ETFs as a crucial deadline approached.

Then, according to Anthony Pompliano in the Pomp Letter, “the game changed.” On Monday, Bloomberg’s Eric Balchunas and James Seyffart increased their odds of spot Ether ETF approval to 75% from 25%, citing “chatter that the SEC could be doing a 180 on this increasingly political issue.”

This sudden shift in the SEC’s stance led to a surge in Ether prices. Matt Hogan, Chief Investment Officer at Bitwise Asset Management, highlighted this development on Yahoo Finance’s Market Domination. He noted a “real sea change in Washington around crypto,” with recent bipartisan crypto legislation and a growing coalition around stablecoins.

Hogan emphasized that “Washington has gotten the message that crypto is good for America and popular with American voters.” This change in sentiment was also reflected in former President Donald Trump’s recent pro-crypto stance.

Whether or not the SEC’s apparent change of heart is related, crypto enthusiasts are energized by the prospect of political support. Pompliano articulated this optimism, stating, “A bunch of people on the internet created a $2.6 trillion industry in the face of government pressure. Imagine what happens when the government is now actively courting these individuals and companies, along with embracing the technology. The headwind becomes a tailwind quickly.”

Spoken like a true crypto bull.

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A surge of enthusiasm permeates cryptocurrency markets as hopes for the approval of exchange-traded funds (ETFs) directly investing in Ether soar, signaling a notable shift in sentiment.

The positive outlook coincides with a flurry of developments involving potential ETF issuers, stock exchanges facilitating their trading, and the US Securities and Exchange Commission (SEC). Sources familiar with the matter revealed that the SEC requested updates to rule change filings from the New York Stock Exchange and Cboe Global Markets, indicating a potential uptick in the likelihood of approval. However, the outcome remains uncertain, underscoring the complexities involved.

Fidelity Investments recently amended its S-1 registration statement with the SEC for its proposed spot-Ether ETF, addressing key concerns such as staking and derivative investments. This move precedes a looming May 23 deadline for the SEC to review VanEck’s ETF application, adding to the anticipation.

Analysts view potential ETF approval as a significant regulatory milestone, with expectations of substantial inflows into Ether upon implementation, akin to the impact observed with Bitcoin ETFs. Geoff Kendrick of Standard Chartered estimates inflows ranging from $15 billion to $45 billion within the first year post-approval.

The Grayscale Ethereum Trust (ETHE) serves as another barometer of market sentiment, with its discount to underlying Ether holdings narrowing significantly, reminiscent of patterns observed before the approval of Grayscale’s Bitcoin Trust conversion.

Ether’s recent price surge, coupled with heightened probabilities of ETF approval, reflects growing optimism among investors. While the SEC refrains from commenting on specific filings, stakeholders eagerly await developments in this evolving landscape.

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Uniswap Labs, the innovator behind Ethereum’s leading decentralized trading platform, refuted the US Securities and Exchange Commission’s (SEC) allegations, contending that crypto tokens do not qualify as securities but are akin to file formats such as PDFs.

The New York-based startup rebuffed claims of operating an unregistered exchange and broker-dealer, following a Wells notice served by the SEC’s Enforcement Division last month, signaling potential legal action.

Marvin Ammori, Uniswap Labs’ Chief Legal Officer, emphasized during a Zoom press conference, “Tokens are simply a file format for value and are not inherently securities. The SEC must unilaterally redefine exchange, broker, and investment contracts to encompass our operations.”

In a detailed 40-page response to the SEC, Uniswap Labs asserted that pursuing legal action against them poses risks to the SEC’s authority over crypto tokens. The company expressed readiness to litigate, confident of prevailing.

SEC Chairman Gary Gensler’s stance that decentralized exchanges fall under regulatory oversight has been challenged by Uniswap Labs, which argued that UNI tokens, serving as Uniswap’s governance token, do not meet the Howey Test requirements for investment contracts.

Additionally, Uniswap Labs refuted the classification of LP tokens as securities, clarifying that these tokens function as accounting tools to monitor users’ provided assets and earned fees, rather than serving investment purposes.

Uniswap Labs’ response underscores the ongoing debate surrounding the regulatory status of digital assets and decentralized exchanges, highlighting the evolving landscape of crypto regulation.

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In a significant market move, the price of ether (ETH) surged more than 10% to $3.4K after Bloomberg analysts substantially increased the likelihood of the U.S. Securities and Exchange Commission (SEC) approving spot ETH exchange-traded funds (ETFs). Previously, markets had largely anticipated SEC rejections of proposed funds this week.

Eric Balchunas, Bloomberg’s Senior ETF Analyst, tweeted that he and colleague James Seyffart raised their odds of spot Ether ETF approval to 75%, up from a mere 25%. Balchunas noted a change in sentiment within the SEC, suggesting a potential shift in the regulatory stance on what he termed an “increasingly political issue.” The sudden alteration caught many by surprise, leading to a flurry of activity as investors reassessed their positions.

The SEC faces imminent deadlines for final decisions on spot ETF approvals or denials, following multiple delays in reaching determinations on these funds.

The surge in ETH prices also lifted Bitcoin (BTC), which gained over 5% and approached the $70,000 threshold. Additionally, the Grayscale Ethereum Trust (ETHE), a closed-end fund that Grayscale seeks to convert into a spot ETF, experienced notable movement. ETHE, which had been trading at a significant discount to its net asset value as investors speculated on SEC disapproval, surged more than 23% on Monday in response to the optimistic outlook for spot ETH ETF approval.

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After a decade-long tenure at Grayscale Investments, Michael Sonnenshein is stepping down as chief executive officer of the cryptocurrency asset manager. He will be succeeded by Peter Mintzberg, currently serving as the global head of strategy for asset and wealth management at Goldman Sachs Asset Management. Mintzberg is set to assume the role of CEO on August 15, according to a press release from Grayscale. During this time, Edward McGee, the Chief Financial Officer, will assume leadership of the company.

Sonnenshein, who joined Grayscale in 2014 and served as CEO for the past three years, decided to depart to pursue other interests, the company stated. The Wall Street Journal was the first to report this news.

During Sonnenshein’s tenure, Grayscale achieved a significant victory against the SEC, leading to the approval of the first spot-Bitcoin ETFs. The company had long sought to convert its Grayscale Bitcoin Trust (ticker GBTC) into an exchange-traded fund. However, since the conversion, GBTC has experienced substantial outflows, with investors gravitating towards newly launched, more cost-effective spot-bitcoin ETFs.

GBTC, once a primary avenue for investors to gain exposure to Bitcoin without directly purchasing the token, reached assets of nearly $44 billion in 2021. However, since the ETF conversion in January, GBTC has seen outflows exceeding $17.6 billion. In contrast, other US spot-bitcoin funds have attracted positive inflows this year, with BlackRock’s $15.6 billion leading the pack. GBTC’s 1.5% expense ratio has been cited as a deterrent for investors, compared to the lower fees charged by other funds.

Sonnenshein defended GBTC’s relatively high fee in a January interview with Bloomberg TV, citing the company’s size, liquidity, and track record. Despite Grayscale’s efforts to convert GBTC into an ETF, the SEC rejected the proposal in 2022, arguing that a Bitcoin-based ETF lacked sufficient oversight to detect fraud. Grayscale responded with a lawsuit against the SEC, alleging discrimination against its product while approving similar Bitcoin-futures ETFs.

The search for a new CEO began in late 2023, according to sources familiar with the matter cited by the Wall Street Journal. However, the decision was unrelated to GBTC’s performance or outflows.

The crypto asset class stands at a crucial turning point, making this the opportune time for a seamless transition, Sonnenshein expressed in a press release.

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Morgan Stanley (NYSE:MS)  disclosed a substantial stake in Grayscale’s Bitcoin Trust , totaling nearly $270 million as of March 31, according to a recent 13F filing.

This investment, along with similar disclosures from banking giants like JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), and UBS (NYSE:UBS), underscores growing institutional interest in cryptocurrency among wealth management clients.

It’s worth noting that these holdings likely represent investments made on behalf of clients, rather than a direct bet on Bitcoin by the banks themselves.

Following the approval of spot Bitcoin exchange-traded funds in January, Morgan Stanley began offering allocations to its clients, albeit on an unsolicited basis. This means that clients had to propose the investment to the broker, reflecting the cautious approach taken by financial institutions towards cryptocurrency investments.

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In a significant legal development, a Nigerian court has determined that Binance executive Tigran Gambaryan can be prosecuted on behalf of the cryptocurrency exchange in an ongoing tax evasion case.

The case involves Binance and its executives, including Gambaryan, a U.S. citizen serving as head of financial crimes compliance, and British-Kenyan national Nadeem Anjarwalla, who holds the position of regional manager for Africa. They collectively face four counts of tax evasion and have also been accused of laundering over $35 million and engaging in specialized financial activities without proper licensing. All parties have pleaded not guilty to the money laundering charges.

Following the court ruling, Binance’s legal representation declined to comment, as did Gambaryan’s lawyer.

Expressing disappointment with the court’s decision, a spokesperson for Binance emphasized that Gambaryan, who lacks decision-making authority within the company, remains detained despite what they perceive as baseless charges. The spokesperson urged for Gambaryan’s release pending ongoing discussions between Binance and Nigerian government officials.

While Gambaryan remains in custody, Anjarwalla fled the country in March, prompting Nigeria’s security adviser’s office to collaborate with Interpol to pursue his arrest.

Binance’s CEO has criticized Nigeria for what he perceives as a troubling precedent, particularly after executives were initially invited to the country for discussions with authorities and then detained as part of a broader crackdown on cryptocurrency-related activities.

Notably, Binance itself has not been directly implicated in the tax evasion case by Nigeria’s Federal Inland Revenue Service (FIRS), which has indicated that Gambaryan may face charges on the exchange’s behalf.

The court ruling stipulated that Gambaryan, as the chief financial compliance officer of Binance, should be served with the charges against the exchange. This decision was based on his role and his appointment to represent Binance in a meeting held in Nigeria.

Gambaryan is scheduled to be arraigned in court on Wednesday to enter a plea on behalf of Binance. However, his bail application related to the money laundering case was denied by the court.

Nigeria has attributed its currency challenges in part to Binance, citing cryptocurrency platforms as preferred avenues for trading the Nigerian naira amid persistent dollar shortages in the country.

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The Internet Computer-based Bitfinity platform introduces its Ethereum Virtual Machine, facilitating smart contract execution for Bitcoin protocols and enabling Bitcoin DeFi applications with Runes support.

Built on the Internet Computer protocol, Bitfinity integrates with the Bitcoin network, offering asset bridging to other blockchains. Leveraging Ethereum’s smart contract language Solidity, developers can access Bitcoin-based tokens, including BTC, Ordinals, and Runes.

The Bitfinity EVM enables the deployment of Bitcoin-based Solidity smart contracts, expanding functionality for transferring assets. As an Ethereum Virtual Machine, it serves as the backbone for executing smart contracts, akin to an operating system for Ethereum.

With Runes gaining traction since its launch alongside the Bitcoin halving event, Bitfinity aims to tap into this momentum by enabling smart contract capabilities, facilitating the development of Bitcoin DeFi applications. Despite a initial surge in activity, Runes’ network fees have stabilized following the launch frenzy.

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Bitcoin (BTC-USD) found itself grouped with other speculative investments during the run-up of the Federal Reserve’s last tightening cycle, declining on expectations that higher interest rates would dampen the risk appetite. Now, with optimism growing again that borrowing costs could soon be heading lower, proponents of the biggest cryptocurrency argue that it’s more akin to high-growth assets such as shares of technology companies.

The token has been trading as such recently. The 90-day correlation coefficient of the digital currency and the tech-heavy Nasdaq 100 index reached 0.46 this week, marking the highest level since late August. A coefficient of 1 indicates the assets are moving in lockstep, while minus 1 would show they’re moving in opposite directions. After the Fed began raising its target rate on overnight loans between banks in early 2022, the correlation jumped to more than 0.8, the highest since the digital asset burst onto the mainstream consciousness.

Joshua Lim, co-founder of trading firm Arbelos Markets, remarked that individuals are redirecting their attention towards cryptocurrency as a growth asset or an asset that embodies network value. He elaborated that its capacity as a technology and means of transferring value implies that it will exhibit a stronger correlation with other assets that are also characterized by growth, such as the Nasdaq and technology equities.

Bitcoin proponents have persistently promoted the coin as an uncorrelated asset, one liberated from governmental influence and resistant to external pressures or influences. Introduced to the public in 2008 by an individual or group known as Satoshi Nakamoto, Bitcoin was conceived to establish a decentralized currency independent of governmental and central bank control. Throughout its evolution, it has been heralded as a digital equivalent to gold, an inflation hedge, and a repository of value. However, the price volatility of Bitcoin has undermined several of these narratives. The approval of US exchange-traded funds earlier this year to hold Bitcoin directly has opened the token up to a new tier of investors.

Lim highlighted that various factors, such as the introduction of US ETFs, Bitcoin’s record-breaking surge in March, and its blockchain halving in April, served as significant incentives for traditional investors to take notice of the cryptocurrency asset class and begin investing in it. However, with these catalysts now in the past, attention has shifted more towards the broader macroeconomic landscape.

Bitcoin surged after the ETFs went live in January, reaching a record of almost $74,000 in March, before paring gains as demand for the investment vehicles began to cool. The token rose about 1.4% on Friday to around $66,200 and is up almost 10% this week. Bitcoin has jumped about 58% this year, compared with an 11% increase in the Nasdaq 100.

Lim highlighted that various factors, such as the introduction of US ETFs, Bitcoin’s record-breaking surge in March, and its blockchain halving in April, served as significant incentives for traditional investors to take notice of the cryptocurrency asset class and begin investing in it. However, with these catalysts now in the past, attention has shifted more towards the broader macroeconomic landscape.

Wednesday’s data release indicated a moderation in underlying US inflation during April, marking the first decline in six months. This development aligns with the direction desired by Federal Reserve officials before considering rate reductions. Specifically, the core consumer price index, which excludes volatile food and energy costs, increased by 0.3% from March, following three consecutive months of readings that exceeded expectations. 

Despite this, several Federal Reserve officials emphasized on Thursday the importance of maintaining higher borrowing costs for an extended period while awaiting further evidence of inflation easing. This stance suggests that they are not inclined to hastily reduce rates.

Lim expressed the view that if the Fed were to decrease rates, it would generally have a positive impact on risk assets. They added that such a scenario would also be favorable for cryptocurrencies.

CCData observed that despite increased focus on the Federal Reserve among crypto investors, Bitcoin has demonstrated consistent growth and resilience since the launch of US ETFs, according to Winterflood.

Winterflood remarked that it would be intriguing to observe the consequences if the Fed indeed reduces rates in the upcoming months. They pondered whether Bitcoin might replicate its past behavior as a perceived riskier asset, or if it would transition into merely an alternative asset embraced by conventional markets.

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Bank of America (NYSE:BAC) has revised its rating on Coinbase (NASDAQ:COIN) from underperform to neutral, with a raised price target of $217, up from $110.

According to the bank’s report, the current macroeconomic environment has fostered growth in crypto market capitalization and trading volumes.

While the bank acknowledges positive dynamics, it also highlights risks associated with Coinbase, including its reliance on transaction revenue and the ongoing SEC lawsuit.

Coinbase shares saw a 2.5% increase in pre-market trading on Friday following the upgrade. The stock, trading around $204 at the time of publication, has benefited from Bank of America’s revised outlook.

Bank of America’s analysts, led by Mark McLaughlin, emphasized several factors contributing to the upgrade, including Coinbase’s expense management and diversification efforts, which are expected to bolster earnings.

However, the analysts cautioned that certain risks, such as Coinbase’s dependence on transaction revenue and regulatory uncertainties related to the SEC lawsuit, could limit the stock’s potential upside.

The recent decline in Coinbase shares, over 9% following reports of potential competition from the Chicago Mercantile Exchange  in spot bitcoin trading, underscores the volatility and competitive landscape facing Coinbase and similar exchanges.

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