SEC Appeal, BTC-Spot ETF Outflows, and Fed Rate Cut Bets – This Week in Crypto

US Economic Data, the Fed Rate Path, and the Middle East

US labor market and services sector data eased fears of a hard US economic landing. The stats also sank bets on a 50-basis point November Fed rate cut while raising the possibility of a November rate hold:

• JOLTs Job Openings unexpectedly jumped from 7.711 million in July to 8.040 million in August.
• The ADP reported a 143k increase in employment in September, up from 103k in August.
• The ISM Services PMI rose from 51.5 in August to 54.9 in September. The pickup in services sector activity was significant as the services sector accounts for almost 80% of the US GDP.
• US unemployment unexpectedly dipped from 4.2% in August to 4.1% in September as nonfarm payrolls surged by 254k. (August: 159k).

According to the CME FedWatch Tool, the probability of a 50-basis point November Fed rate cut fell from 53.3% (September 27) to 0% (October 4). Meanwhile, the chances of the Fed holding interest rates steady increased from 0% to 6.6% in the same timeframe.

Investor sentiment toward the Fed rate path and the escalation in the Middle East conflict overshadowed the upbeat US economic data. The possibility of a broader regional conflict left the crypto market in negative territory.

From Monday, September 30 to Saturday, October 5, the total crypto market cap was down 6.16% to 2.115 trillion.

US BTC-spot ETF Market Impacts BTC Demand

Demand for US BTC-spot ETFs waned in the week ending October 4. According to Farside Investors, the US BTC-spot ETF market saw net outflows of $274.3 million in the week after inflows of $1,106.5 million the previous week. Significantly, the spot ETFs had net outflows for the first time in four weeks.

Among key issuers:

• iShares Bitcoin Trust (IBIT) reported net inflows of $X million (PW: +$110.8 million).
• ARK 21Shares Bitcoin ETF (ARKB) had net outflows of $206.8 million (previous week: +$269.5 million).
• Fidelity Wise Origin Bitcoin Fund (FBTC) saw net outflows of $138.9 million (PW: +$206.1 million).
• Grayscale Bitcoin Trust (GBTC) saw net outflows of $13.9 million (PW: -$21.8 million).

Overall, five of the eleven issuers posted net outflows, affecting BTC demand.

Monday, September 23, through Saturday, September 28, BTC was down by 5.27% to $62,177.

SEC vs. Ripple: SEC Appeal Sends XRP to $0.50

On Wednesday, October 2, the Securities and Exchange Commission filed a Notice of Appeal, signaling its intent to appeal rulings in the SEC v Ripple case.

The SEC filing, just days before the appeal window closed, gave no clues on which rulings the agency plans to challenge. Pro-crypto lawyer James ‘MetaLawMan’ Murphy predicted the SEC to appeal two rulings:

• Disgorgement ruling – In her final judgment, Judge Analisa Torres ordered Ripple to pay $125 million in civil penalties for selling unregistered XRP. However, she denied the SEC’s request for disgorgement of $1.1 billion.
• The Programmatic Sales of XRP ruling – In July 2023, Judge Torres ruled that programmatic sales of XRP do not satisfy the third prong of the Howey Test.

A former SEC lawyer expected the SEC to appeal, saying that the agency would probably appeal Judge Torres’s July 2023 ruling concerning the XRP programmatic sales. The unnamed lawyer also stated,

‘Everyone over there [at the SEC] truly believes that the decision is wrong, that it’s not good law, and should be appealed.”

The crypto market awaits the SEC’s Form C, which will reveal its appeal strategy.

From September 30 to Saturday, October 5, XRP was down 16.81% to $0.5335.

US ETH-spot ETF Market Outflows Resume

The US ETH-spot ETF market affected ETH price trends in the week ending October 4.

According to Farside Investors, the US ETH-spot ETF market recorded net outflows of $25.4 million after inflows of $73.5 million from the previous week.

Flow trends across the US ETH-spot ETF market have failed to propel ETH to new highs. Since launching, the US ETH-spot ETF market has seen total net outflows of $548.0 million compared with US BTC-spot ETF market inflows of $18,530 million. ETH price trends continued to reflect the lack of demand for US ETH-spot ETFs.

Monday, September 30, to Saturday, October 5, ETH was down 8.91% to $2,422.

Bitwise Files XRP-spot ETF Application

This week, Bitwise Invest filed an XRP-spot ETF application with the SEC. Fox Business journalist Eleanor Terret verified the filing, stating,

“Bitwise Invest’s Chief Investment Officer Matt Hougan has confirmed the filing I shared is authentic.”

However, XRP failed to mirror November 2023’s reaction to the fake news of a BlackRock (BLK) XRP-spot ETF application. The SEC’s plans to appeal rulings in the Ripple case reduced the chances of an SEC approval.