Crypto Spot ETF Inflows, SEC Appeal and XRP, Gensler Grilling – This Week in Crypto

US Economic Indicators Signal Soft Landing and 50-Basis Point Cut

This week, US economic indicators boosted expectations of a soft US economic landing. Key indicators included:

• S&P Global Services PMI: Slipped from 55.7 in August to 55.4 in September, highlighting resilience in the services sector, which accounts for nearly 80% of the US economy.
• Initial Jobless Claims declined from 222k (week ending September 14) to 218k (week ending September 21). A tighter labor market could support wage growth and private consumption, accounting for over 60% of US GDP.
• PCE Price Index: Increased by 2.2% year-on-year in August, down from 2.5% in July.
• Michigan Consumer Expectations: Advanced from 72.1 in August to 74.4 in September.

The US data increased expectations of a 50-basis point November Fed rate cut. According to the CME FedWatch Tool, the probability of a 50-basis point November Fed rate cut rose from 50.4% (September 20) to 53.3% (September 27).

A resilient US economy and rising bets on a 50-bps Fed rate cut drove demand for riskier assets, including crypto. From Monday, September 23, to Saturday, September 28, the total crypto market cap gained 4.62% to $2.266 trillion, outperforming the Nasdaq Composite Index’s modest 0.95% in the week ending September 27.

US BTC-spot ETF Market Sees Demand Surge

Buyer appetite for US BTC-spot ETFs grew in the week ending September 27. Upbeat US economic indicators and softer inflation signals fueled expectations of a 50 bps November Fed rate cut and a soft US landing.

News of BlackRock’s (BLK) amendment, requiring Coinbase (COIN) to process BTC withdrawals within 12 hours, also boosted inflows.

Before BlackRock’s filing news emerged, the iShares Bitcoin Trust (IBIT) had net inflows of $6.7 million between September 2 and September 21. However, in the week ending September 27, IBIT saw net inflows of $499 million. Notably, demand for the broader US BTC-spot ETF market also improved. According to Farside Investors,

• ARK 21Shares Bitcoin ETF (ARKB) had net inflows of $269.5 million in the week ending September 27. (Previous week: +$101.9 million).
• Fidelity Wise Origin Bitcoin Fund (FBTC) saw net inflows of $206.1 million (PW: +$137.7 million).
• Bitwise Bitcoin (BITB) reported net inflows of $82.8 million (PW: +$67.0 million)
• Grayscale Bitcoin Trust (GBTC) saw net outflows of $21.8 million (PW: -$28.9 million).

Overall, the US BTC-spot ETF market had net inflows of $1,106.5 million in the week ending September 27. Nine of the eleven issuers reported net inflows, fueling BTC demand.

Monday, September 23, through Saturday, September 28, BTC was up by 3.58%, reaching $65,864.

SEC vs. Ripple: Appeal Jitters Leave XRP below $0.60

Uncertainty about SEC plans to appeal against rulings in the SEC v Ripple case impacted XRP demand. On Wednesday, September 25, Fox Business journalist Eleanor Terrett reported a conversation with a former SEC attorney, saying,

“A former SEC lawyer who recently left the agency tells me the SEC will ‘probably’ appeal Judge Torres’s July 2023 ruling concerning the XRP programmatic sales in the Ripple case partly because: ‘everyone over there [at the SEC] truly believes that the decision is wrong, that it’s not good law, and should be appealed.”

On July 13, 2023, Judge Analisa Torres ruled that Programmatic Sales of XRP do not satisfy the third prong of the Howey Test.

In October 2023, Judge Torres rejected an SEC Motion for Interlocutory Appeal, asking the court permission to appeal the Programmatic Sales of XRP ruling. The SEC’s failed motion meant that the agency would have to wait until after the final judgment before appealing the Programmatic Sales ruling. The appeal window closes on October 7.

From September 23 through Saturday 28, XRP was up 0.26% to $0.5897, trailing the broader crypto market.

ETH Outmuscles BTC as US ETH-spot ETF Market Logs Inflows

The US ETH-spot ETF market got a boost from BlackRock’s amendment to the Coinbase Prime Broker Agreement. iShares Ethereum Trust (ETHA) saw a sharp increase in demand. According to Farside Investors, ETHA had net inflows of $X million in the week ending September 27.

Furthermore, the US ETH-spot ETF market saw total net inflows of $X million in the week ending September 27.

From September 23 through September 28, ETH was up 4.35% to $2,696, outperforming BTC.

SEC Chair Gensler Faced Intense Scrutiny on Capitol Hill

On Wednesday, September 25, all five SEC Commissioners gave testimony at a  US House Committee on Financial Services Committee hearing on Capitol Hill. Committee Chair Patrick McHenry set the tone for the hearing, stating that the SEC has become a rogue agency under Chair Gensler.

House majority whip Tom Emmer referenced the infamous Debt Box case, saying,

“Your attorneys, who no doubt heard your anti-crypto rhetoric, which is not based in law, went out and deliberately lied to a court in order to effectuate the commands from their Chair to prosecute crypto companies. Chair Gensler, do you know of any other time in history where the SEC has been sanctioned by a court for material misrepresentation?”

Other Commissioners offered their views on the SEC’s mantra of regulation through enforcement.

SEC Commissioner Hester Peirce referenced the SEC vs. Binance case. She said that the SEC failed in its duty as a regulator by using imprecise language. Furthermore, she admitted the agency should have admitted that the crypto itself is not a security a long time ago.

On September 13, 2024, the SEC asked the court’s permission to amend the Binance complaint, clarifying its position on crypto asset securities. In a footnote, the SEC stated,

“The SEC is not referring to the crypto asset itself as the security; rather the SEC has consistently maintained since the very first crypto Howey case the SEC litigated, the term is shorthand. […] Nevertheless, to avoid any confusion, the PAC no longer uses the shorthand term and regrets any confusion it may have invited in this regard.”

Chair Gensler could face further scrutiny following Vice President Kamala Harris’s recent support for US digital assets.