Coinbase: Regulatory Drive as the Key Catalyst for the Upcoming Cryptocurrency Market

Coinbase: Regulatory Drive as the Key Catalyst for the Upcoming Cryptocurrency Market

Coinbase: Regulatory Drive as the Key Catalyst for the Upcoming Cryptocurrency Market

US cryptocurrency exchange Coinbase stated in its weekly market commentary released last Friday (17th) that macroeconomics remains a key driving factor for cryptocurrency performance, but “we believe that upcoming major catalysts may be driven by regulations,” such as the decision on the Ether spot ETF, the potential veto by the White House on overturning SAB 121 regulations, and the upcoming vote in the US House of Representatives on the FIT21 bill.

Regarding the Securities and Exchange Commission’s (SEC) decision on the Ether spot ETF application, Coinbase stated that the likelihood of approval has not changed substantially. In another report released last week, the exchange estimated the approval probability to be close to 30% to 40%. Analysts believe that even if these ETFs are rejected on the first approval deadline of May 23, the possibility of lawsuits overturning this decision is also high.

According to previous reports by Zombit, the US Senate voted 60 to 38 last week to overturn the Accounting Staff Bulletin 121 (SAB 121) issued by the SEC in 2022. However, the White House has expressed that President Biden will veto this voting result. Nevertheless, Coinbase believes that, given the bipartisan support for this bill, this decision may still have room for change.

Coinbase also pointed out that the “21st Century Financial Innovation and Technology Act” (FIT21) may be voted on in the House of Representatives later this month. This bill mainly provides a clear process to determine which digital asset transactions fall under the jurisdiction of both the SEC and the Commodity Futures Trading Commission (CFTC), and outlines disclosure requirements for digital asset developers, which will provide a clearer path for compliance. In addition, potential stablecoin legislation may accelerate the adoption cycle of stablecoins, such as the “Lummis-Gillibrand Paying Stablecoin Act.”

In terms of other driving factors, Coinbase stated that the stagnation of retail sales last month led them to believe that the economy may be peaking. Analysts believe that two 25 basis point interest rate cuts in Fed Funds Futures starting from September 2024 seem appropriate, as well as the cyclical decline of the multilateral US dollar index.

Coinbase also mentioned that all 13F holdings reports disclosed in the first quarter of this year show that traditional conservative funds have started holding Bitcoin spot ETFs, such as the Wisconsin Investment Board (SWIB), and the exchange believes this is a “positive signal of Bitcoin’s acceptance in diversified investment portfolios.” Data shows that a total of 937 institutions hold Bitcoin spot ETFs.

Coinbase added: Coinbase also mentioned in the report that future repayments to customers by FTX exchange and the upcoming US election are also potential catalysts. Documents submitted to the court by FTX show that the company expects to have $15.5 billion to $16.3 billion available for distribution to creditors, and some traders expect that about half of the funds will be reinvested in the cryptocurrency market.