ETH ETFs are welcome news but will many buy them?

The state of the BTC and ETH markets is well-illustrated by the BTC and ETH implied volatility indices. We see a pattern now where intense speculation and significant market volatility builds up around perceived risk events such as the Bitcoin halving, the last FOMC meeting and the ETH ETF approvals, but then an almost equally fast return to stable prices, and reduced implied volatility and volatility risk premiums once the events play out.

In the broader economy, last week saw two key Fed officials lay out important insights into how they view current economic conditions, reiterating their firm commitment to reducing inflation to the two percent target. While a resilient labour market has bolstered overall economic activity, persistent inflation and financial stability remain key areas of focus for policymakers.

The US housing market, in particular, faces continued challenges as existing home sales in April fell unexpectedly due to rising mortgage rates and high house prices. It marks the second consecutive month of falling sales and reflects deteriorating builder confidence. Higher mortgage rates have significantly impacted the housing market, with significant relief unlikely until the Fed begins cutting.

US business activity is also robust, jumping to  its highest level in over two years in May, driven by robust growth in the services sector. However, manufacturers report escalating prices for various inputs, indicating potential future price inflation.

In a recap of the crypto news, the biggest development last week  was of course the SEC approval for ETH ETFs, representing a significant win for firms like VanEck, Fidelity, and BlackRock, and a major step forward for the broader cryptocurrency industry.

Meanwhile, the US House of Representatives approved the CBDC Anti-Surveillance State Act with a 216 to 192 vote. The bill aims to prevent the Fed from issuing a CBDC to individuals, though critics argue it could undermine the global dominance of the US dollar and US banks.

And, as if on cue, US Presidential candidate Donald Trump has begun accepting cryptocurrency donations, positioning himself as the “crypto candidate” in stark contrast to the Biden administration’s more cautious stance on cryptocurrencies.

Have a good trading week!

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