Five Things to Know in Crypto This Week: The Halving, the Fed, and the Middle East

Bitcoin Halving Leaves the Block Subsidy at 3.125 BTC

On Saturday morning (April 20, UTC), the heavily anticipated Bitcoin Halving occurred at block height 840,000. As a result of the halving, the block subsidy declined to 3.125 BTC.

The next Bitcoin Halving will occur in 2028.

Geopolitical tensions in the Middle East and a less dovish Fed overshadowed the lead-up to the Halving event.

Between BTC, Geopolitical Tensions, and the Fed Pivot

BTC faced a third consecutive weekly loss on Saturday. From Monday (April 15 to Saturday (April 20), BTC was down 3.08% to $63,981. Significantly, BTC fell to a Friday low of $59,691 before briefly retaking the $65,000 handle.

Intensifying geopolitical tensions in the Middle East fueled a flight to safety, impacting BTC and the broader crypto market.

On Friday (April 19), reports of Israel firing a missile at Iran sent BTC to sub-$60,000. However, BTC reversed the losses after Iran downplayed the attack. Nevertheless, the threat of an escalation in the Middle East conflict lingered going into the weekend.

The decline in investor confidence regarding multiple 2024 Fed interest rate cuts also contributed to the losses going into the weekend. On Tuesday (April 16), Fed Chair Powell warned that the interest rates need to stay higher for longer to allow the Fed to gain confidence inflation was returning to the 2.0% target.

According to the CME FedWatch Tool, the probability of the Fed standing pat in June increased from 71.7% (April 12) to 83.0% (April 19). Furthermore, the likelihood of the Fed maintaining interest rates at 5.50% in September increased from 23.5% to 34.9%.

The intensifying tensions in the Middle East and a less dovish Fed also impacted the Nasdaq Composite Index. In the week ending April 19, the Nasdaq Composite Index slid by 5.52% to 15,282.

BTC-Spot ETF Market Sees a Second Week of Net Outflows

BTC-spot ETF market flow data reflected the effects of the Fed and intensifying tensions in the Middle East. Significantly, demand for BTC-spot ETFs weakened as investors awaited the Bitcoin Halving.

In the week ending April 19, the BTC-spot ETF market saw total net outflows of $204.3 million, up from total net outflows of $82.8 million in the previous week. According to Farside Investors,

• Grayscale Bitcoin Trust (GBTC) saw total net outflows of $458.4 million in the week ending April 19. GBTC saw total net outflows of $766.6 million in the previous week.
• Fidelity Wise Origin Bitcoin Fund (FBTC) saw total net inflows of $93.6 million, up from $90.2 million in the week ending April 12.
• iShares Bitcoin Trust (IBIT) saw total net inflows of $165.4 million, down from $486.5 million in the week ending April 12.

BTC-spot ETF flow data for Friday (April 19) glossed over a gloomy week for BTC and the broader crypto market.

The Lummis-Gillibrand Payment Stablecoins Act

On Wednesday (April 17), Senators Kirsten Gillibrand and Cynthia Lummis introduced the Payment Stablecoin Act to the Senate. If passed, the bill will deliver a regulatory framework to protect consumers and drive innovation. The bill will also target illicit financing and money laundering.

Ripple CEO Brad Garlinghouse discussed the stablecoin market, saying,

“The demand for stablecoin has exceeded what people thought. Some forecast the stablecoin market to grow from around $150 billion today to around $2,800 billion by 2028.”

Senators Cynthia Lummis and Kirsten Gillibrand introduced the Responsible Financial Innovation Act in 2022. While the bill has similar goals to the Payment Stablecoin Act, the legislation also gives the Commodity Futures Trading Commission a more significant role in regulating digital assets.

SEC vs. Ripple: Opposition Brief Filing Due on April 22

XRP was at risk of a fourth successive weekly loss. From Monday (April 15) to Saturday (April 20), XRP was down 0.14% to $0.5030. XRP outperformed the broader crypto market, which declined by 2.71% to $2,260 billion.

Investors remained focused on the ongoing SEC v Ripple case, which is in its final stages. The SEC and Ripple are arguing for and against a punitive disgorgement for Ripple breaching US securities laws. In June 2023, Judge Analisa Torres ruled Ripple failed to register XRP as a security in sales to institutional investors.

According to the amended court briefing schedule, Ripple must file its opposition brief by April 22. The opposition brief is in response to the SEC’s remedy-related opening brief.

In March, the SEC alleged that Ripple continued breaching US securities laws after the 2020 complaint. Significantly, the SEC argued that the court should prohibit Ripple from selling XRP to institutional investors and order Ripple to pay a $2 billion disgorgement.

Notably, the SEC did not distinguish between XRP sales to US and non-US institutional investors. It was unclear if this was strategic or an oversight.

Morrison vs. NAB: The US Supreme Court ruled that the SEC only has jurisdiction over US-based sales.