ETPs: BlackRock files for spot bitcoin ETF, with Coinbase as a crypto custodian

Stablecoins: Hong Kong eyes stablecoin regulatory regime by 2024

Miners: Bitcoin miner revenue faces downturn, but profitability holds strong

Ethereum: Ethereum staked ready to flip ETH on crypto exchanges

Regulators: Hinman documents in Ripple case raise questions about SEC’s motives

Digital asset markets held onto a $1 trillion market capitalization this week, but virtually all cryptocurrencies were rocked by the Federal Reserve’s latest meeting and the ongoing hangover from last week’s SEC enforcement actions against Binance and Coinbase. Though the Fed took a break from rate hikes for the first time in ten consecutive meetings, projections for their appropriate policy path implied two more rate hikes are still likely this year before the upper limit on the Fed Funds rate hits a peak of 5.75%, up from 5.25% today (if subsequent hikes continue to follow a pace of 25bps).

With inflation continuing to subside, now rising at a rate of 4.0% in the US and well-below the short-term rate set by the Fed, it remains to be seen how necessary more hikes will end up being. It is worth noting that the US Dollar Index (DXY) declined in the aftermath of the Fed’s decision to forgo a hike this week, slipping to its lowest level in more than a month. Combined with a virtually unchanged yield on the 10-year US Treasury throughout the end of the week, that suggests market participants may be somewhat skeptical of more hikes ahead.

In any case, cryptocurrencies like Bitcoin (BTC), the largest crypto asset by market cap, continued their downtrend on the news from the Fed. As MRP mentioned earlier this month, cost pressures from a surging hash rate, high electricity costs, and sagging price growth among digital assets, has caused an acute wave of selling among Bitcoin miners recently. That trend continued into this week, as data from Glassnode showed miners or entities minting coins by verifying transactions on the blockchain moved 6671.99 BTC ($174 million) to exchanges between May 31 and June 13. Cointelegraph notes that the 14-day average of miner transfers to exchanges increased sharply to 489.26 BTC over that span, its highest level since March 2021.

By Thursday, BTC's unit price in USD terms slipped below $25,000 for the first time since March. It appeared the week to June 16 would be another period of dismal news until the world’s largest asset manager offered a reprieve. On Thursday evening, Blackrock filed a Form S-1 with the SEC to register and launch the iShares Bitcoin Trust. That helped BTC recover the $25,500 threshold by Friday morning.

Though technically referred to as a trust in official documentation, much like the SPDR Gold Shares (GLD) ETF, this product will be structured as a commodity-backed spot Bitcoin ETF. Though BTC is not a physical commodity, it is widely viewed as a digital commodity – particularly among those whose opinion matters most. As MRP has highlighted several times in the past, SEC Chairman Gary Gensler has been open about his position that the regulatory body considers Bitcoin as a commodity and, therefore, outside the purview of a securities regulator.

That’s not to say the SEC hasn’t been heavily skeptical of Bitcoin being packaged into exchange traded products, however. Though several ETFs tracking BTC futures contracts (linked to CFTC-regulated indices) have received the SEC’s stamp of approval over the last several years, dozens of applications for BTC-backed ETFs been rejected from several different firms including WisdomTree, Fidelity, ARK Invest, VanEck, and Grayscale. In fact, the SEC is currently being sued by Grayscale over the commission’s rejection of its application to convert the Grayscale Bitcoin Trust (GBTC) into an ETF last June. The SEC’s rejections have not focused on issues related to the potential ETF issuers or sponsors themselves, but rather, concerns about market manipulation within cryptocurrencies and the lack of a surveillance-sharing agreement (SSA) between a “regulated market of significant size” and a regulated exchange.

This begs the question of why anything different should be expected from BlackRock’s application. For one, it should be noted that BlackRock doesn’t seem to make ETF applications that it feels won’t be approved, considering the company has a record of 575 ETF approvals and only one rejection. Moreover, a new rule filing from Nasdaq (SR-NASDAQ-2023-016), where Blackrock will list their proposed ETF, notes that the exchange expects to “enter into a surveillance-sharing agreement with an operator of a United States-based spot trading platform for Bitcoin”, directly addressing the SEC’s key concern regarding a spot Bitcoin ETF. The Nasdaq filing explicitly highlight its intention to list BlackRock’s proposed iShares Bitcoin Trust and is likely pursuing SEC approval for its SSA plan as a precursor to the commission’s ultimate decision on the Bitcoin ETF.

May 22, 2023: Tether Expands Profits, Dominance, and Bitcoin Holdings as T-Bills and Reverse Repo Become Reserve Standards →

February 22, 2023: Ethereum May Face Contagion from SEC Crackdown on Crypto Exchanges’ Staking Services →

February 14, 2023: Staking Services and Stablecoins in SEC Crosshairs as Crypto Industry Preps for Court Battles →

January 24, 2023: Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed →

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →

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