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What Happened This Week

A Green Weekly Close For Crypto And U.S. Equities

Bitcoin and the crypto market, along with U.S. equities, closed the last week in the green, with the S&P 500 and the Nasdaq experiencing their highest weekly closes in history, both at record highs. Bitcoin closed the previous week with a gain of 7.8% and Ethereum saw a weekly gain of 4.9%. The positive price action was accompanied by weekly inflows for digital asset investment products which saw inflows for the second week totaling $932 million. Interestingly, the last three days of the week made up 89% of the total flows, indicating that the CPI data release ignited the inflows and last week’s rally in general.

The weekend once again did not present us with noteworthy price action, with Bitcoin, Ethereum and the broader crypto market trading more or less sideways on muted volume. There were some exceptions in the altcoin sphere, with FTM, SOL or BONK seeing some price increases over the course of the weekend.

While the price action was not very exciting, Justin Drake, an Ethereum researcher announced, that he had become an advisor of the EigenFoundation alongside Dankrad Feist and presumably other Ethereum Foundation researchers. Both will receive millions of dollars of tokens vesting over three years. The disclosures were likely sparked by a tweet, where Cobie asked Vitalik how he feels about “Ethereum Foundation core developers or researchers taking life-changing $ packages from projects built on Ethereum to become “advisors”, when those projects may have conflicting incentives with Ethereum, either now or in the future?”. Justin Drake will be the guest of our upcoming VERIFIED Podcast episode; make sure you do not miss it.

A Wake-Up Tweet on Monday

While Monday was a public holiday in Switzerland, our friends in the U.S. had a normal working day, and things really started to get interesting on Monday night, when Eric Balchunas and Jeff Seyffart, both ETF analysts at Bloomberg, tweeted on X, that they are increasing their odds of spot Ether ETFs approval to 75% (up from 25%), as they were hearing chatter that the SEC could be doing a 180 on this increasingly political issue. Eric’s tweet had an immediate impact on the crypto markets, with ETH jumping up more than 18% in a matter of hours, BTC increased by 5%, ETHBTC was up 15% during the first two hours after the tweet, and the total crypto market capitalization increased by more than 5% or roughly $160 billion on Monday evening alone.

All Eyes Were on the Ether Spot ETF Developments

Over the course of Tuesday, Wednesday, and Thursday, the market was focused on the developments regarding the Ethereum spot ETF applications with various potential Ethereum spot ETF issuers submitting their Amended 19-b4 filings via CBOE or Nasdaq. Additionally, other indicators, such as the odds for approval on the betting platform Polymarket increasing from 7% last week to 78% on Thursday afternoon and the ETHE discount to NAV hit its lowest levels since 2021 on Wednesday (-7.2%), were also indicating an imminent approval of the Ether spot ETFs on Thursday.

Bitcoin spot ETFs with constant inflows

The U.S.-based Bitcoin spot ETFs are on an 9-day streak with net inflows, and the inflows have been above $100 million per day since 14 May, with multiple $200+ million days this and last week. BlackRock’s IBIT saw $290 million in net inflows on Tuesday and is close to taking over the number one spot when it comes to Assets Under Management from GBTC. In the chart below, it is visualized how the outflows from GBTC have slowed down over the last month and how the inflows into the other spot ETFs have started to increase again in recent weeks.

NVIDIA Earnings: A Bull's Catalyst?

On Wednesday evening, Nvidia revealed its financials for the first quarter of 2024 and showed no signs of an AI slowdown. Its data center business grew by a whopping 427% in the latest quarter as companies kept snapping up their artificial intelligence processors. In addition to announcing earnings, Nvidia communicated a 10:1 stock split, and they also announced a timeline for its next-generation GPU, called Blackwell, which will be available in data centers in the fourth quarter. The market liked the news during the after-hours trading session on Wednesday, with NVDA increasing by 4%, reaching a new all-time high above $1’000. The positive sentiment in U.S. equities continued during the pre-market trading hours on Thursday, with NVDA continuing its rally and the S&P500 reaching new all-time highs. The price action during the official trading hours then showed a different picture, with the SPX correcting down -0.74%, closing the day at 5’267. Bitcoin, Ethereum and the broader crypto market also traded to the downside on Thursday afternoon, anticipating the news regarding the Ether spot ETFs.

Gold, DXY, ETHBTC, BTCSPX, COIN and MSTR

Gold traded to the upside during Friday last week and reached a new all-time high on Monday at $2’450, slightly above its April high and has been trading to the downside all week, currently down 5% from its Monday high. The U.S. Dollar Index (DXY) seems to have found a temporary bottom last week and has been trading sideways with a tendency to the upside this week. Ethereum was temporarily up more than 27% against Bitcoin over the course of this week, mainly due to the spike up on Monday after the rumors regarding the spot ETF approvals. At the time of writing ETHBTC is trading at 0.0549, up 22% on the week.

When charting Bitcoin against the S&P 500, one can see that Bitcoin has been trading in a sideways range against the SPX since reaching its current all-time high on March 14, 2024, as seen in the chart below. COIN has been trading sideways since mid-April and is currently trading at $218 while MSTR is trading at $1'544, after retesting its April high of $1'739 this week.

SEC Approved 8 Ether Spot ETFs

The SEC approved 19b-4 forms for the ETFs from BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton. The issuers need to have their S-1 registration statements go into effect before trading can begin, and it is unclear how long this process will take. James Seyffart mentioned that the process could be completed in a couple of weeks, but that there are plenty of examples where it took more than three months. When looking at the price action of Ethereum before and after the official approval, one gets a picture of how chaotic this whole process was. A flash crash, likely initiated by algo-traders at 22:00 CEST, then a recovery of over 10% with a high at $3’900 until the moment of approval at around 23:00 CEST. ETH has since been trading to the downside, trading at $3’700 at the time of writing.

Rest in Peace, Kabosu

Kabosu, the dog that inspired the meme behind Dogecoin, is dead. The news started spreading early in the morning today, and a farewell party for the dog will be held on Sunday in a Narita city park. Kabosu was over 17 years old and was diagnosed with leukemia and liver disease at the end of 2022. Crypto Twitter has already started to mourn its passing with numerous tweets and tribute posts. Right after the news broke, DOGE surged around 8% but has since corrected and is down 2% on the day at the time of writing.

Market Sentiment: Crypto Is Greed, Stocks Are Neutral

A look at the Crypto Fear & Greed Index reveals that we were back in Extreme Greed levels (76) this week and currently in Greed territory at 74. The stock market is already back in Neutral territory (51), after spending a couple of days at Greed levels. The AAII Investor Sentiment Survey shows an interesting development this week: A big jump to the upside when it comes to bullishness. 47% of AAII Members feel that the stock market is bullish for the next six months, up from 40.9% last week. Interestingly, the amount of members who feel bearish also increased to 26.3% (up from 23.3%). Many of last week’s neutral members seemed to have changed their minds, mainly towards a more bullish stance.

Our Take

We have witnessed positive momentum for both crypto and equities markets. The record highs in the S&P 500 and Nasdaq, coupled with significant weekly inflows into digital asset investment products, suggest sustained investor confidence. The approval of ETH spot ETFs might further bolster the crypto market, as evidenced by the recent surge in ETH prices surrounding ETF-related speculation. Additionally, Nvidia's robust earnings and the positive sentiment on its growth in AI technology could continue to drive bullish trends in tech stocks. However, it is important to note that macroeconomic conditions might induce some volatility. Markets are currently pricing in no U.S. rate cuts until September, reflecting a shift to a "higher for longer" stance in response to recently published economic data and statements from Fed officials.

The Week Ahead

Monday, May 27, 2024

• Solana V1.18 Release

Wednesday, May 29, 2024

• German CPI
• Stacks Nakamoto Upgrade

Thursday, May 30, 2024

• U.S. GDP

Friday, May 31, 2024

• China Manufacturing PMI
• EU CPI
• U.S. PCE Price Index