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Weekly Market Update: The Politics of Crypto

In this weekly crypto market update, we take a closer look at the potential ETH ETF approvals and a shift in US political attitudes towards digital assets. Stay tuned for other macroeconomic trends and updates from around the crypto space.

Posted May 29, 2024

HVC Market Update Week 22
HVC Market Update Week 22

It’s been hard for this writer to pick this week’s biggest event. Was it the big step towards an ETH ETF approval or the sudden and profound change of the US political establishment’s attitude toward digital assets? I’m going to side with the political switch hit. 

Pollsters must have got their abacuses out and realised that marginalising an investment class owned by over 20% of the population was a bad call. Whatever the reason, the warm breeze blowing through the halls of US power is welcome. 

In other crypto news, Metamask is rumoured to soon be supporting Bitcoin and Coinbase continues its moves into a broad based financial service provider by embracing TradFi. Giving your retina data to Worldcoin is apparently a privacy issue and the Cardano founder is confused why Bitcoin even exists (yes that is irony, you choose which part).

In macro news, questions are being asked about who will be the buyer of US bonds in the future, while globally PMI readings continue to show improvement, particularly in manufacturing. 

In the US, the Fed minutes reiterate what we all know, inflation is taking longer to abate than we all hoped. 

The same is true in Europe with the UK’s inflation reading higher than expected. 

In Asia, China sent some strong political signals with war games around Taiwan and a big increase in semiconductor manufacturing planned. Japan’s inflation cooled and India’s PMIs are still staggeringly good. 

Locally, Australian manufacturing PMI improved, but is still in contraction territory. In New Zealand retail sales showed a small uptick, but on a per capita basis are dire. Consumer confidence was also up, but off a record low base.

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This week’s crypto market sentiment has retraced slightly into greed territory as the market digested the long term implications of recent announcements.

Screenshot of crypto fear and greed index for may 29 2024

Highlights this week: 

  • A mixed bag across the top 30 assets, with most posting movements in the low single digit range, and all being evenly split on gains and losses.  
  • There were some notable standouts with memecoins and ETH related coins outperforming. 
  • Our buy – sell ratio threw up some interesting divergence.  By order count, the number of buy orders dominated, however by order value, sell orders were overweight. In short some high rollers were taking profit with ETH and stablecoins dominating the sell side.  
  • Swaps volume was also up, the key observable trend was you selling stablecoins, particularly NZDD, for Altcoins.  That is exactly what stablecoins are for! 
  • At the time of writing BTC was down 1.5%, while ETH continued its run up 4%. BNB, SOL and XRP were all down 2-3%. 
  • In the majors UNI continued its great run up another 17% on top of last week’s 40% gain.  Meanwhile AUDIO was our best performing asset up 32%.

View all top gainers: Visit the top gainers page to find out more.

Highlights from the crypto space

The SEC approved a rule change to allow all the spot ETH ETFs to proceed. There are still another set of approvals to go. Let’s be honest, it is a bit of a surprise, very welcome though. 

These ETFs exclude any ETH staking which is an odd bit of mental gymnastics by the SEC. As Blockworks points out, yield in the native currency makes a big difference to returns. Compound interest is an epic tool. 

ETH chart of staking vs holding

Kaiko rightly points out that the elephant in the room is the Greyscale ETHE product which is trading at a large discount and likely to mirror the same trend as Bitcoin with large outflows.

Perhaps even more important than the ETH news is the profound (ie 180 degree) change in attitude toward digital assets coming out of the US government. Presidential candidate Trump has come out in full support of digital assets too. 

The UK’s FCA gave approval to list Wisdomtree’s Bitcoin ETPs on the London Stock Exchange

US lawmakers voted 279-136 in favour of the Financial Innovation and Technology bill. 70 Democrats supported it in what can only be seen as a smack down of the current anti-crypto policy.

In response, The SEC urged US lawmakers to vote down the bill (which would create a new legal framework for crypto) because it would ‘undermine existing legal precedent”. I’ll just leave this here.

Screenshot of Pierre Rochard tweet

Other notable highlights from around the crypto space:

  • The House also passed a bill preventing the Fed from launching a CBDC.
  • Rumours are around that Metamask will add native Bitcoin support sometime in June. 
  • Uniswap responded to the SEC’s Wells notice. They seem to be on script with others, in that the SEC is out of bounds on this. 
  • Rocketpool is proposing to revise its tokenomics. 
  • The final ruling of Craig Wright vs COPA is out. The judge is pretty clear that he’s not Satoshi Nakamoto. 
Text screenshot of Dr Wright
  • Coinbase keeps moving toward Tradfi – launching gold and oil futures. Coinbase is also forecast to be a big winner in the recent politicisation of crypto in the US. 
  • Kraken, Coinbase and the social media giants are trying to form a coalition to stop pig butchering scams. 
  • Hong Kong’s privacy commission issued Worldcoin with a stop notice. 
  • A hacker has taken over admin rights and minted 5 bn GALA tokens worth ~$216m. Sadly not their first hack. 
  • PSA – there are some big token unlocks this week for OP, DYDX and 1inch. 
  • Cardano’s CEO came out with the extraordinary statement, “I don’t see how #Bitcoin survives. It’s a religion, not an ecosystem.” We’ll just post this chart and move on. 👇
Cardano price against Bitcoin

What is going on in the world of Finance … 

There is growing concern over who will buy US Government bonds as they keep issuing more debt. One analyst called it the “ most predictable crisis in history” … but also a problem for tomorrow. 

🌎 Macro news TLDR: …Cooling US CPI invigorates markets.

Banner for macro news HVC weekly market update

U.S. economic news

The Fed minutes from their May meeting came out saying it’s taking longer than they thought to get on top of inflation and that a rate rise is a possibility. Flash PMI for May came in at 54.4, up 3 points on April. Manufacturing PMI is up to 52.4. 

Meanwhile in Europe….

Eurozone Flash composite PMI for the zone was 52.3, with manufacturing at 49.6.

UK’s CPI for April fell to 2.3% annualised, however analysts expected 2.1%. Services inflation was particularly sticky at 5.9%. Core CPI was 3.9%. All in all, the wind came out of the ‘rate cuts’ sails. The UK also called a snap election for the 4th of July, … obviously a historically great day for ruling conservatives. 

UK Inflation chart

And in Asia Pacific…

China launched a series of war games around Taiwan as ‘punishment’ for its separatist comments. They are also radically expanding their semiconductor manufacturing.

India’s flash PMI for May was 61.7, and Japan was 52.4. Japan’s inflation cooled for the 2nd straight month adding to the BoJ challenges. Singapore’s inflation is steady, while the Bank of Korea held rates. 

Graph showcasing Japan's core inflation

In Australia, inflation expectations eased slightly, while manufacturing PMI continued to contract at 48.9. Services are ripping at 53.1. 

In New Zealand Stats NZ reported that retail sales for the March quarter were up 0.5% in real terms. This is the first increase in 2 years.

However, it’s 2.4% down on last year’s number, and we’ve had record immigration, so the per capita numbers are, politely, grim to catastrophic. Consumer confidence is up in April to 84.9. The historical average is 110, so there is still a ways to go.

Screenshot of graph of percentage change

That’s a wrap for this week. 

Stay tuned for the next update.

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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.

Last updated May 29, 2024

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