Crypto News

Ethereum Spot ETF Approved By SEC

The Securities Exchange Commission's recent Ethereum Spot Exchange Traded Fund (ETF) approval has sparked significant market interest. In the days leading up to the announcement, Ethereum's price surged by up to 19%, coinciding with the official 19b-4 filing, signalling the possibility of ETF approval. Following the news, market activity remained somewhat subdued initially before experiencing renewed buying momentum. As of Monday, the 27th of May, Ethereum's price is $3,926.80, just 4% below its all-time high of $4,093.

The SEC's decision to approve eight companies for an ETF includes a particular fund that tracks Ethereum's price without necessitating the purchase of the underlying asset. This approach offers investors convenience and eliminates the complexities of acquiring Ethereum through cryptocurrency exchanges, such as the rigorous 'Know Your Customer' (KYC) procedures and asset withdrawal to self-custodial wallets. This method provides a safer means for investors to access assets listed on stock exchanges.

It is crucial to note that despite the approval, the tradability of such securities is not immediate, as companies must register a detailed S-1 document before going public. However, it is widely anticipated within crypto circles that this registration process will be a mere formality. While it typically takes up to five months for such ETFs to become tradable on stock exchanges, expedited processing is probable, with availability expected within weeks and potentially by mid-June, aligning with the swift processing of the Bitcoin Spot ETF.

Although an SEC commissioner may challenge the ruling, the likelihood is minimal given the advancement of the approval process. Analysts project that the new Ethereum Spot ETF could attract approximately 10-20% of the inflows witnessed by Bitcoin ETFs thus far, amounting to an estimated $1.33 to $2.66 billion. Concerns linger regarding potential outflows from Grayscale's existing Ethereum holdings upon the ETF's launch, paralleling the experience of their Bitcoin trust, which currently holds over $11.3 billion in Ethereum assets.

Eight other firms, including VanEck, Blackrock, Fidelity, Franklin Templeton, ARK 21Shares, Bitwise, and Invesco Galaxy, have received regulatory approval in addition to Grayscale. Hashdex was excluded from approval. The SEC's approval of such trust funds, alongside the Bitcoin Spot ETF, underscores the mainstream recognition of these assets, likely paving the way for additional ETFs covering a broader spectrum of cryptocurrencies, including Solana and others, shortly.

The rapid approval of the Ethereum Spot ETF following the Bitcoin Spot ETF underscores the enduring presence of cryptocurrencies, even amidst scepticism from some quarters. This development signals the increasing integration of cryptocurrencies into mainstream financial markets, affirming their long-term relevance and viability.

U.S House Of Representatives Pass FIT21 Digital Assets Bill

Following last week's newsletter on the U.S. House of Representatives vote for the Financial Innovation and Technology for the 21st Century Act (FIT21) crypto bill, the vote favoured regulating digital assets. The bill passed with 279 votes in favor and 136 against, supported by 71 Democrats and 208 Republicans. This indicates a broad political consensus on the need for cryptocurrency legislation and regulation framework, setting a precedent in Congress.

However, this is just the first step. The bill now heads to the Senate, where its fate is uncertain. The Senate's previous lack of engagement with similar legislation casts doubt on its prospects.

Rep. Josh Gittenheimer supports the bill, arguing that clear rules are necessary to improve the cryptocurrency market. He described the bill as well-reasoned and thoughtful.

Despite its passage, there were significant detractors. President Joe Biden expressed dissatisfaction with the policy and opposed it, although he did not indicate he would veto it. The Chairman of the Securities Exchange Commission (SEC) also opposed the bill, claiming it was unnecessary and could undermine existing securities regulations. Given Mr. Gensler's ongoing battle against cryptocurrency, his opposition is unsurprising.

Senior Democrat Maxine Waters voiced concerns that the bill could enable businesses to evade accountability for past illegal activities. Nonetheless, the bill's passage marks a step toward increasing investor security in an industry that has faced scrutiny for malfeasance in recent years.

Courts Finalise Genesis and NYAG Settlement, Ending Protracted Legal Battle

In a recent development in New York, a court has given its nod to a settlement involving Genesis Capital, a former player in the cryptocurrency lending arena, and the New York Attorney General (NYAG). Following Genesis's filing for Chapter 11 bankruptcy in January 2023 and its association with business mogul Sam Bankman-Fried and his cryptocurrency exchange FTX, the court-mandated Genesis to pay a settlement amounting to $2 billion to the NYAG. This sum is designated to compensate investors who faced losses through Genesis's 'Gemini Earn' program.

The NYAG's lawsuit against Genesis also implicated two other entities, Gemini and Digital Currency Group, accusing them of fraudulent activities. Specifically, the NYAG alleged that Gemini was cognisant of Genesis's high-risk lending practices but failed to apprise investors of the potential dangers. The lawsuit alleges that these three entities were involved in illicit activities, attracting over 230,000 investors and dealing with sums exceeding $1 billion, with 29,000 investors in New York.

As a repercussion of the court's ruling, Genesis is prohibited from conducting any future operations within New York. However, Digital Currency Group was not included in the settlement, as it contested the process, citing preferential treatment of certain creditors. Concurrently, as part of its bankruptcy proceedings, Genesis has consented to reimburse $3 billion worth of assets to affected customers, a plan that has received court sanction.

Crypto Analysis

Bitcoin (BTC)

Bitcoin has spectacularly broken above the key daily resistance highlighted in last week’s analysis. It is evident that all upward hurdles have been cleared following the breakout of the confluence of resistance at $67,451 on May 17. This level coincided with the 0.618 Fibonacci retracement from the all-time high to the significant low on May 1, which stood at $67,197 and was marked by blue arrows.

Last week, the price consolidated at that resistance before suddenly surging through it on Monday. After a brief retreat, Bitcoin successfully retested this support area, demonstrating resilience. The crucial question now is whether Bitcoin can sustain this level.

The chances of reaching new all-time highs are quite high, but Bitcoin needs to maintain its price above this key Fibonacci level and resistance. Over the last six days since the price surge, volume has decreased during the current down move. It remains to be seen if the market has enough momentum to return to the highs.

Currently, the price holds above the 10-day exponential moving average (EMA), which is a positive indication. Both the 100-day and 50-day EMAs continue to slope upward, and the StochRSI is moving away from an overbought region, suggesting that the price still has the potential to move in either direction.

While the price would have been preferable to consolidate at last Monday’s highs, we are seeing mixed signals. The return to the old resistance, now new support, was a solid move. Additionally, the bounce-off support and continued movement above the moving averages indicate that the path of least resistance remains to the upside. We are still in a risk-on environment unless we see a move below the support level. 

It is crucial to monitor this support area over the next few days closely. I look forward to revisiting the Bitcoin chart next week.

Bitcoin Dominance (BTC.D), excluding major stablecoins

Bitcoin dominance experienced a significant crash through support levels on Monday and Tuesday, just as it seemed on the brink of achieving new highs. This incident underscores the inherent volatility and unforgiving nature of the cryptocurrency markets. Analysing the weekly chart reveals that we might be on the threshold of a major alt-season, contingent upon breaking and closing below the weekly trendline support depicted on the right.

After last week’s sharp decline, Bitcoin dominance saw a brief upward correction over the following couple of days, tapping old support now turned into new resistance shown by the blue arrows, before falling on Sunday and now, at the current time of writing on Monday morning, we are producing yet another bearish candle. The daily Stochastic RSI momentum indicator appears overstretched, with its two crossed lines suggesting a potential upward bounce. According to conventional technical analysis, a move above the 20 line would provide a stronger confirmation of a temporary low. However, this seems unlikely due to the increased bearish price action.

Furthermore, a bearish divergence has appeared in the weekly RSI. Another downward move from this point, particularly below the next swing low, could strongly indicate that an alt-season is approaching. However, for altcoins to capitalise on this, a declining Bitcoin dominance (BTC.D) should ideally be accompanied by increased altcoin prices. A decrease in BTC.D without a corresponding increase in the altcoin market is not favourable for altcoins. Ideally, a fall in dominance should coincide with a rise in altcoin values to signal a robust alt-season.

ETH/USDT & ETH/BTC

Last Monday witnessed a remarkable surge in the price of Ethereum as it decisively breached resistance levels on substantial trading volume. This rapid ascent was primarily fueled by speculation within the market of a large fundamental event. However, the momentum gained further traction following the unexpected announcement of this event, the SEC's approval of a Spot Ethereum Exchange Traded Fund (ETF).

Consequently, as of this Monday morning, Ethereum stands on the brink of reaching and potentially surpassing new all-time highs. This development underscores the profound impact of regulatory decisions on cryptocurrency markets and highlights Ethereum's growing mainstream acceptance and integration into traditional financial frameworks.

The breached resistance level stood at $3,357, a point established by the daily swing high on April 28th. Although the Stochastic RSI is somewhat overbought, this momentum indicator is unlikely to prevent the price from achieving new monthly highs. It seems to be only a matter of time before Ethereum reaches its previous all-time high of $4,868 from November 2021. At this stage, it is not a question of if but rather when this milestone will be reached, assuming no major disruptions occur in the cryptocurrency market.

Ethereum's price is gaining against the 10-day EMA, but given the strong price action, this is not expected to impact the chart in the short term significantly.

The only significant barrier between Ethereum's current price and new all-time highs is the 0.786 monthly Fibonacci retracement level. This level, which stems from the old November 2021 all-time high down to the major June 2022 low, is at $4,014.90. Given the substantial upside volume and price action, this level is unlikely to provide any real resistance over the medium term.

A quick glance at the ETH vs. BTC daily chart reveals a similar situation to ETH vs. USDT. There has been a solid breakout accompanied by significant price action and volume, making visiting the old monthly highs highly likely.

It must be noted that the monthly ETH/BTC chart looks quite different compared to the ETH/USDT chart. While ETH/USDT is nearing its all-time high, ETH/BTC remains far from its peak.

In Summary

In the volatile realm of cryptocurrency, a mere week can usher in significant changes, and the past seven days have indeed been a testament to this reality. Bitcoin has remained in consolidation near its highs, while Bitcoin dominance has breached major weekly support levels, and Ethereum has broken out against Bitcoin. This prompts us to ponder: when will the remaining altcoins follow suit?

Typically, an Ethereum breakout against Bitcoin is a precursor to an altcoin season. However, aside from a select few, the broader altcoin market has shown minimal movement over the past few months. While meme coins continue to outpace the majority, established altcoins have yet to exhibit notable gains. Nevertheless, all indicators on the chart suggest the onset of an alt-season. The pertinent question now is whether altcoins can replicate the impressive price action demonstrated by Ethereum in the preceding week. The answer to this query may reveal itself in the coming week.

As we navigate the market dynamics, I wish everyone a prosperous and rewarding trading week ahead.

Macro News

House Passes CBDC Anti-Surveillance Bill

As mentioned above in Ash Duke’s crypto news, the US government's House of Representatives passed the crypto-focused FIT21 bill which now faces scrutiny from the Senate. The House also voted on a second crypto bill, the Central Bank Digital Currency (CBDC) Anti-Surveillance State Act, which passed 216-192. Three Democrats voted in favour, and no Republicans voted against the proposed law.

House Chairman Patrick McHenry, in his remarks to the House, said, “This bill is straightforward. It halts unelected bureaucrats from issuing a central bank digital currency, or CBDC, that would be detrimental to Americans’ right to financial privacy.”

McHenry points out examples of governments “weaponising their financial system against their own citizens”, highlighting the Chinese Communist Party’s use of CBDCs to “track spending habits of its citizens” and how data collected is used to “create a social credit system that rewards or punishes people based on their behaviour”.

As with FIT21, this bill awaits approval or denial from the Senate.

China Competes With US Chips Stimulus

China has set up its largest semiconductor investment fund to date, in a continued effort to break free from years of US imposed sanctions that restrict China’s access to the latest high-end chip technology.

This is the third phase of China’s National Integrated Circuit Industry Investment Fund, with 344 billion yuan ($47.5 billion) raised from both central government and state-owned banks and enterprises.

The fund marks a renewed effort by Xi Jinping’s government to gain independence in cutting edge AI chip manufacturing. The US – starting with the Trump administration and continued by the current Biden administration – has imposed increasingly restrictive import tariffs on Chinese technology.

This recent escalation of the ongoing US-China tech trade war, according to Bloomberg, is in response to the current US administration’s “sweeping restrictions on China’s ability to buy advanced chips and chipmaking equipment”. The US is “now urging allies — including the Netherlands, Germany, South Korea and Japan — to further tighten curbs on China and plug holes in existing export controls”.

During the 2024 IMF-World Bank Spring Meetings in Frankfurt, US Treasury Secretary Janet Yellen told reporters that the US and Europe must respond to China’s “industrial overcapacity” in a “strategic and united way”, to keep the manufacturing industry viable for both China and the West.

UK Bitcoin and Ether ETPs Start Trading

The UK appears to be lagging behind in bitcoin and cryptocurrency policy, with the Financial Conduct Authority (FCA) making access to digital assets difficult for retail investors. This so-called retail investor “protection” has stepped up since the US approved spot bitcoin exchange-traded funds (ETF) in January this year, which are available to retail as well as institutional investors.

There is some hope, though. The FCA recently approved spot bitcoin and ether exchange-traded products (ETP), a similar investment vehicle to ETFs, for listing on the London Stock Exchange (LSE). ETPs from issuers WisdomTree, 21Shares and Invesco have all received FCA approval to start trading today.

But there is a catch: the hard-backed ETPs are only available to institutional investors as the FCA has ruled that “crypto derivatives are ill-suited for retail consumers due to the harm they pose”. This position starkly contrasts similar retail-inclusive decisions by regulators across much of continental Europe, Canada, the US, Australia, Hong Kong and Brazil.

In addition to the three asset managers mentioned above, other applications have been submitted for listing in London. One issuer, however, told the FT they won’t be listing such products in the UK “while retail investors remain off limits.” The issuer said launching such products in the UK would not be “universal” and would go against the “principle that underlies ETFs everywhere.”

The Week Ahead

Events This Week

Tuesday

• Australia retail sales

• US S&P/Case-Shiller home price index, Conference Board consumer confidence, Dallas Fed manufacturing index

• Fed’s Mester, Kashkari, Cook, Daly speak

Wednesday

• BOJ Adachi speech

• Japan, Germany, France, Italy consumer confidence

• South African election

• Fed releases Beige Book economic survey

Thursday

• South Africa rate decision

• US initial jobless claims, GDP, wholesale inventories, pending home sales

• Fed Bostic, Williams, Logan speak

Friday

• Japan unemployment, CPI, industrial production, retail sales

• China NBS manufacturing and non-manufacturing PMI

• EU, Canada, Turkey GDP

• US core PCE, personal income, personal spending, Chicago PMI

• UK housing prices

• Fed Bostic speech

Earnings Calendar