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A look back at May: Ether shines as its spot ETFs obtain surprise approval from SEC  

May cryptomarket updates, SEC approval for ETFs
Date
29/05/2024
Written by
Dorothée Enskog
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Bitcoin, Ethereum and many other altcoins outperformed leading stock market indices in May. This was led by the reemergence of the hope that we will see rate cuts later this fall and by the initial approval of spot Ethereum exchange traded funds (ETFs) in the US.

Crypto has also turned into a hot topic in the ongoing US presidential campaign and two crypto-related bills were up for vote in May. The first would have required banks to record crypto holdings on their balance sheets – a major risk. The SAB 121 regulation, as it is known, was voted down. The second, the Financial Innovation and Technology for the 21st Century (FIT21) Act aims to categorize digital assets. It clarifies whether a crypto asset is a security or commodity – a move lifting years of legal uncertainty. FIT21 now needs the approval of the Senate and the US President.

Hopes of a reelection of Donald Trump in November also supported global crypto markets. “The leading Presidential candidate is explicitly saying he will make America the leader in bitcoin & crypto, while supporting the right to self-custody. All the critics were wrong. The government won’t ban it, they’re embracing it,” the crypto profile, Anthony Pompliano noted following a campaign speech held by Trump end-May. It’s worth noting that political donations to crypto advocacy groups already exceed $90 million five months ahead of the election. Trump even accepts donations in cryptocurrencies for his presidential campaign.

In May, another piece of good news came for crypto investors. Most creditors of the bankrupt FTX crypto exchange will be reimbursed for their losses after the recovery of about $15 billion.

Monthly cryptocurrency exchange volumes  reached $1.1 trillion on May 29, a level at par with the volumes recorded in January and February. These are far below the $2.5 trillion exchanged in March, when Bitcoin set an all-time high.

Ethereum – May’s shining star in the crypto universe

Ethereum, the second-largest cryptocurrency, was in the spotlight in May. The first spot Ether ETFs applications were ultimately approved by the Securities and Exchange Commission (SEC) , despite rumors of deferred decisions preceding the announcement. The removal of clauses about staking from the applications seem to have done the trick.

Eight Ether ETFs, including those of Blackrock, Ark Invest, Van Eck and Hashdex, got the initial regulatory nod. This does not suffice for a listing of the ETF. The SEC also needs to approve the applicants’ S-1 forms, which is the proper registration statement of the financial product. Crypto experts expect the ETFs to start trading as of June or July.

“The market could cause ETH prices to rise significantly into the actual date when those ETFs start trading. The ETF issuers did not expect the SEC to approve these products and, hence, still need sufficient capital on day 1,” 10x Research forecasts. Standard Chartered Bank expects the price of Ether to rise to $8,000 by year-end and inflows into the above-mentioned Ether ETFs to reach between $15 and $45 billion by next summer.

The “approval signals that the SEC views that ETH is a commodity and not a security - contrary to the position it continued to take prior to the events of this week,” the blockchain software company ConsenSys said. “With these approvals, the SEC implicitly stated that ETH (without staking) is a commodity rather than a security. This isn’t just about access to ETH, but has significant and likely positive ramifications on how all similar tokens will be regulated in the U.S. with respect to trading, custody, transfer, etc.” Will Cai, the head of indices at Kaiko Research echoed.

Ethereum has strengthened 20 percent so far in May and is up 67 percent since the beginning of the year.

Adoption of Bitcoin continues relentlessly

Regulatory filings for the first quarter show that professional investment firms hold $10.7 billion worth of Bitcoin. “Institutions are buying. Summary data: 944 firms with more than $100m report owning bitcoin ETFs Collectively, they own $10.7 billion. Already a massive success, and just a down payment on what's to come,” the Chief Investment Officer (CIO) of Bitwise, Matt Hougan, said.

“Fidelity says pension funds are beginning to explore Bitcoin and crypto. US Pension funds have more than $10 trillion dollars in AUM. Giga Bullish!” the crypto profile Lark Davis noted.  

More than half of the 25 largest US hedge funds have some exposure to Bitcoin, with Millennium Management in the lead, holding $2 billion worth of Bitcoin ETFs. Not only institutional investors have jumped on the Bitcoin ETF bandwagon, so did the pension fund of the state of Wisconsin that disclosed it bought $99 million worth of BlackRock's Bitcoin ETF, $IBIT. The price of Bitcoin has risen 10 percent so far in May and is up 62 percent since the beginning of the year.

Bitcoin ETFs now manage more than $58 billion  

The 11 spot Bitcoin ETFs approved by the SEC in January now manage more than $58 billion. Grayscale Investment’s incumbent Bitcoin Trust, converted into an ETF back then, is the main loser. Roughly $17 billion has been flowing out of its $GBTC ETF since then, as Grayscale’s 1.5 percent fee is far higher than those of its competitors. BlackRock’s $IBIT overtook $GBTC as the largest spot Bitcoin ETF. $IBIT has in less than five months managed to amass $19.7 billion in net assets, compared to $GBTC’s $19.6 billion. Grayscale’s CEO, Michael Sonnenshein, announced his resignation during the month. He will be replaced by the Goldman Sachs executive Peter Mintzberg as of Aug 15.

In Hong Kong, the spot Bitcoin and Ether ETFs launched late April recorded total inflows of roughly $273 million during their first week of trading. This figure could soar in the future as there are rumors that these listed crypto ETFs will soon be available to investors from mainland China, where all crypto transactions have been banned since 2021. "The implications for this are absolutely enormous, basically means mainland [China] money can buy it," Richard Byworth, a managing partner at SyzCapital, said. Australia is next in line to approve spot crypto ETFs. These may be listed on the Australian Securities Exchange (ASX) during the course of 2024.

Inclusion of MicroStrategy in benchmark index, competitor mimics its strategy

MicroStrategy, the listed company holding most Bitcoins, will be included in the benchmark MSCI World Stock Index as of June 1. MicroStrategy launched its Bitcoin strategy in August 2020 and has since then amassed 214,400 Bitcoins – more than 1 percent of Bitcoin’s total supply. Meanwhile, Block, the fintech company formerly known as Square, announced it will be investing 10 percent of its gross profit from Bitcoin products into Bitcoin purchases.

Solana set to overtake Binance as 3rd largest cryptocurrency

Franklin Templeton forecasts that Solana, currently the fourth largest cryptocurrency with a market cap of nearly $70 billion, will soon climb up to the third spot and overtake Binance Coin. The bankruptcy estate of the crypto exchange FTX sold the last batch of Solana tokens, a $2.6 billion stake, at heavily discounted price in May, removing selling pressure. The holding of Solana’s annual two-day meeting and speculation that a spot Solana ETF is likely to be the next crypto product approved by the SEC, boosted demand. Solana has put on 27 percent so far in May.

Binance fined by Canadian regulator & executive remains jailed in Nigeria  

Binance was fined $4.4 million by Canada’s Financial Transactions and Reports Analysis Centre (FINTRAC) for non-compliance of anti-money laundering rules. In Nigeria, the Binance executive, accused of money laundering and tax evasion, and detained in Nigeria since end-February, was denied bail. In India, Binance was granted a virtual asset service providers (VASP) license together with Kucoin. Last month, Binance was allowed to return to the Indian market after paying a $2 million fine for violating money laundering rules.

Binance remains the largest exchange with a 44 percent market share. The price of Binance Coin has increased 1.3 percent so far in May and is up 87 percent since the beginning of the year.

SEC considers $10 million fine requested by Ripple to be ridiculous

The $10 million penalty that Ripple Labs demands would be a “slap on the wrist that neither punishes nor deters,” the SEC said. In April, the US regulator requested that a $2 billion fine be imposed following the multi-billion-dollar business it built selling the unregistered cryptocurrency XRP. Ripple’s request to keep confidential the documents related to its suggested remedy confidential has also been criticized by the SEC.

Additional information about Ripple Labs’ planned launch of its yet unnamed stablecoin will be shared at the XRP Ledger Apex event in Amsterdam mid-June. This has triggered speculation that its actual launch will be announced then. In Japan, Ripple, HashKey, and the SBI Group are set to integrate the XRP Ledger (XRPL) into diverse business operations, starting with supply chain finance. Ripple is the owner of the cryptocurrency XRP that has risen 4.4 percent so far in May.

Cardano ­– Bitcoin Cash merger in the making?

A “hypothetical poll” launched by the founder of Cardano, Charles Hoskinson on X fueled speculation about the potential merger of the cryptocurrencies Cardano and Bitcoin Cash. The poll asked whether the voters would “like to see Bitcoin Cash become a Cardano Partnerchain upgraded with Useful Proof of Work Leios, NiPoPoWs, and Ergo tech, thus being the fastest and most useful proof of work chain ever built?” More than two thirds of the nearly 16,000 voters responded positively to this idea. Cardano, the 8th-largest cryptocurrency, has put on 1.5 percent so far in May.

Polkadot’s ecosystem thrives

The ecosystem of Polkadot saw its daily active addresses nearly triple over the past six months to an all-time high exceeding 605,000 in April. The 14th-largest cryptocurrency also enabled asynchronous backing on the Polkadot blockchain in May. This upgrade increases the speed of validation by the Relay Chain, boosts available blockspace and increases the use of parachain blocks. Polkadot has risen 11 percent so far in May.

Market cap of stablecoins at all-time high

For the first time ever, the market cap of stablecoins exceeded $160 billion in May. The issuer of the largest stablecoin USDT, Tether, benefited from this trend, reporting a first quarter profit of $4.5 billion. Inflows into Tether exceed $20 billion since the beginning of 2024.

Coinbase faces yet another lawsuit – implements Bitcoin’s lightning network

Coinbase, the largest US crypto exchange, implemented Bitcoin’s lightning network during the month. Its customers can now instantly send, receive, or pay with Bitcoin on Lightning directly from their Coinbase account. Read more about Bitcoin’s lightning network here.

As for regulatory developments, Coinbase faced a lawsuit in California, where a group of investors filed a class action lawsuit claiming that it sold unregistered securities and operates as an unregistered securities broker. The SEC charged Coinbase with similar allegations in June 2023 and tried to dismiss Coinbase’s appeal of its enforcement case in May.

Kraken urges dismissal of SEC case, while SEC warns Robinhood it is next in line

As for Kraken, another crypto exchange sued by the SEC, it replied to the charges brought by the US regulator last November in a final brief aiming to dismiss the lawsuit. Kraken is also accused of having failed to properly register its crypto exchange, brokerage and clearing services. The SEC sent a warning that an enforcement action is pending to the fintech Robinhood over its crypto operations in early May, just as it did to Uniswap Labs in April.

“The SEC’s aggressive theories are an effort to expand its jurisdiction beyond [crypto] exchanges to communications technology – and beyond securities to all markets. Their legal arguments are weak and have been refuted by courts,” Uniswap said. Its price is up 42  percent so far in May.

Bitcoin and Ether ETPs start trading in London, while South Korea mulls doing the same

The UK’s Financial Conduct Authority (FCA) approved the listing of Wisdom Tree’s physically-backed Bitcoin and Ether exchange traded products (ETPs) on the London Stock Exchange. These ETPs, which are only available to institutional investors, started trading on May 28. In South Korea, the country’s second-largest party, has pledged to lift the country’s current ban on Bitcoin ETFs. The Democratic Party emerged as the winner of last month’s National Assembly election.

Phishing attacks dropped sharply in April

Phishing attacks fell by 46 percent in April compared to March with 34,619 victims losing a total of $38.6 million as a result, Scam Sniffer said in its monthly report. Almost 90 percent of the stolen assets were ERC20 tokens and due to fake phishing. Fake X accounts remain the primary method for scammers.

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