Disclaimer: This post contains thoughts on crypto, a volatile and risky asset class. It is not investment advice, and you should do your own research. All information is for educational purposes only. Please don’t take risks with money you’re not willing to lose.

After an underwhelming April, May has been incredibly kind to market participants. Macro is heating up, ETH ETFs were approved, and crypto is finally garnering political attention / regulatory clarity. Subsequently, tokens across the board are up with the global market cap reclaiming $2.6T.

Macro

The Labor Department’s most recent CPI reading represents somewhat promising news as inflation is finally trending in the right direction. Aligned with economist’s expectations, the Consumer Price Index rose 3.4% in April, down from 3.5% in March. If this trend continues, the Federal Reserve may finally cut interest rates.

Inflation is the Fed’s worst enemy and has required perpetually amended monetary policy to combat. As interest rates have largely remained stagnant over the past year, the month’s positive CPI report should be well received by investors. If we’re lucky, we may see some cuts by the end of summer. Risk assets, aka cryptocurrencies, should see significantly boosted interest as a result.

The New Gold Standard

The month also brought some renewed buy-side demand for US-based BTC ETF products. GBTC, for example, finally saw it’s first positive flows since launch. In the week of May 20, total inflows surpassed $1B, reaching a two-week high of +$305m on the 21st. Fidelity led this day with $131m alone.

In related news, the state of Wisconsin invested $99m in Blackrock’s ETF offering (IBIT). Additionally, massive hedge fund Millennium disclosed that they have nearly $2B in BTC ETF holdings - perhaps influencing some of the new institutional demand. QCP Capital, a Singapore-based trading firm, notes that Millennium and Schonfeld (another large US hedge fund) have now respectively allocated 3% and 2% of their tokens under management to BTC ETF products.

Collectively, this fresh demand / buy pressure has coincided with a month-long BTC hike from lows of $57k back to just under $70k.

US-Based Ether ETFs

Coming into May, it was widely agreed that the approval of Ether ETFs would be further delayed into the back half of the year. Unexpectedly, sentiment shifted just days ahead of the deadline as reports leaked that the SEC had asked the various applying exchanges to update their 19b-4 filings.

Days later, the SEC ordered for the listing approval of eight different ETH funds including the likes of Blackrock, VanEck, and Bitwise. While there is still no set date for the launch of trading (and it probably won’t be for awhile), this represents a pivotal moment in crypto’s legal battles against the SEC. It also signifies that the current administration is paying more attention to matters regarding crypto regulation.

Interestingly enough, in the weeks prior, former President Trump began expressing his positive sentiment towards the industry. He even went as far as offering crypto as an alternative for campaign donations. It’s very possible that the ETH ETFs were approved as a means to remove any animosity between crypto-natives and the current administration (albeit we represent a fraction of the entire voting population). Nonetheless, political attention is veering towards our industry, effectively putting pressure on the SEC to provide greater regulatory clarity - a crucial barrier to mass adoption.

FIT21

Progressing policy even further, the US House passed the FIT21 bill during the same week. FIT21, or the Financial Innovation and Technology for the 21st Century Act, aims to provide the “robust, time-tested consumer protections and regulatory certainty necessary to allow digital asset innovation to flourish in the United States”. Part of this framework includes delineating the jurisdictional boundaries between the two leading regulatory bodies. The SEC will be responsible for overseeing digital assets that are deemed securities, while the CFTC (Commodity Futures Trading Commission) will regulate commodities / derivatives. Furthermore, the legislation is meant to provide greater consumer protection by mandating disclosure requirements for US-based crypto issuers and establishing guidelines for market participants. In tandem with the Ether ETF approvals, it’s great to see that the current political regime is beginning to take crypto more seriously.

Portfolio Update

All of my positions have remained unchanged since the beginning of the month and will likely stay that way throughout summer. Don’t see any reason to press buttons / capitulate, although I’d consider adding some more ETH based on the recent news.

That’s all I’ve got, see you next time :)