Five Things to Know in Crypto This Week: The Fed Ignites 6.85% Crypto Market Rally

The Fed and US Economic Indicators Fuel Crypto Rally

This week, the US Federal Reserve and US labor market data drove buyer demand for riskier assets, including crypto.

On Wednesday, the Fed cut interest rates by 50 basis points, while the FOMC Economic Projections signaled a soft US economic landing.

The FOMC Economic Projections showed a more dovish rate path, projecting a Federal Funds rate of 3.4% by the end of 2025, down from June’s 4.1% forecast. Despite a more dovish rate path, the growth forecast for 2025 remained at 2.0%, supporting bets on a soft landing. Expectations of a dovish rate path and soft landing were a boon for the crypto market.

On Thursday, US labor market data reinforced bets on a soft landing. Initial jobless claims fell from 231k (week ending September 7) to 219k (week ending September 14). Improving labor market conditions may support wage growth and consumer spending, which accounts for over 60% of the US economy.

From Monday, September 16, to Saturday, September 21, the total crypto market cap was up 6.85% to $2.152 trillion. The crypto market outperformed the US equity markets, with the Nasdaq Composite Index gaining 1.49% in the week ending September 20.

US BTC-spot ETF Market Sees Second Week of Net Inflows

Demand for US BTC-spot ETFs remained robust in the week ending September 20. The Fed rate cut and the expectations of a soft US economic landing fueled net inflows for the second consecutive week.

For the week ending September 20, notable flows included:

• Grayscale Bitcoin Trust (GBTC) saw net outflows of $28.9 million (previous week: -$27.2 million).
• Fidelity Wise Origin Bitcoin Fund (FBTC) had net inflows of $137.7 million (PW: +$218.0 million).
• ARK 21Shares Bitcoin ETF (ARKB) had net inflows of $101.9 million (PW: +$83.1 million).
• Bitwise Bitcoin (BITB) reported net inflows of $67.0 million (PW: +$67.3 million)
• iShares Bitcoin Trust (IBIT) had net inflows of $15.8 million (PW: zero net flows).

Overall, the US BTC-spot ETF market saw net inflows totaling $397.2 million for the week ending September 20 (previous week: net inflows of $403.9 million).

Nine out of the eleven issuers reported net inflows, driving BTC demand.

Monday, September 16, through Saturday, September 21, BTC was up 6.78% to $63,177.

MicroStrategy Purchases Could Tilt the Demand-Supply Scales in Favor of BTC

On Friday, September 20, MicroStrategy (MSTR) founder and chairman Michael Saylor announced the acquisition of 7,420 BTC, stating,

“MicroStrategy has acquired 7,420 BTC for ~$458.2 million at ~$61,750 per bitcoin and has achieved BTC Yield of 5.1% QTD and 17.8% YTD. As of 9/19/2024, we hodl 252,220 BTC acquired for ~$9.9 billion at ~$39,266 per bitcoin.”

The purchase followed the acquisition of 18,300 BTC on September 13. Significantly, the latest BTC purchases, alongside US BTC-spot ETF inflows, could tilt the supply-demand scales in BTC’s favor.

On Friday, MicroStrategy’s share price gained 0.08%, ending the week up 2.34% to $144.78.

Ripple, the SEC, and Capitol Hill

SEC Chair Gensler and US lawmakers were in prep mode ahead of a US Financial Services Committee Hearing, where all five SEC Commissioners will give testimony.

In a recent CNBC interview, SEC Chair Gary Gensler targeted the US digital asset space, warning that the field is rife with fraudsters, scammers, and grifters. Discussing crypto regulations, Gensler continued to reject claims about a lack of regulatory clarity, saying that US securities laws have given clarity for 90 years.

On Thursday, Republican Congressman Ritchie Torres targeted the SEC, noting that the phrase, “digital asset security,” is absent from congressional laws, SEC rules, and Supreme Court rulings. Congressman Torres concluded,

“The SEC invented the term out of thin air.”

SEC Chair Gensler’s reference to US securities laws suggested the agency will continue to target crypto firms and possibly appeal rulings in the SEC vs. Ripple case. Uncertainty surrounding SEC plans to appeal continued to peg XRP below $0.60.

From Monday, September 16, to Saturday, September 21, XRP was up 1.98% to $0.5834, underperforming the broader crypto market.

ETH Outperforms BTC Despite US ETH-spot ETF Market Outflows

The US ETH-spot ETF market continued to report outflows in the week ending September 20.

According to Farside Investors, the US ETH-spot ETF market had total net outflows of $26.2 million (previous week: -$12.9 million). Since launch, the ETH-spot ETF market saw total net outflows of $607.6 million.

Despite the outflows, ETH outperformed the broader crypto market, rallying 11.17% from Monday, September 16 to Saturday, September 21, reaching $2,577.

A mid-week surge in total value locked drove boosted demand for ETH. According to DeFi Llama, Ethereum’s total value locked (TVL) surged from $44.14 billion on September 18 to $48.31 billion on September 20. The rising TVL, a key indicator of market interest, supported an ETH breakout.

Investors look for divergence between the TVL and the market cap of a token. Buying or selling opportunities present themselves at times of greatest TVL and price divergence.