The likelihood of the U.S. Securities and Exchange Commission (SEC) approving an Ethereum (ETH) spot Exchange-Traded Fund (ETF) has significantly decreased.

This is evidenced by market sentiment on platforms like Polymarket, where the approval odds dropped to 24%. 

Despite the crypto community’s optimism earlier this year, recent developments indicate a growing skepticism about the SEC’s approval of Ethereum ETFs, particularly in the lead-up to the anticipated decision date of May 23.

Diminishing optimism 

Eleanor Terrett, a reporter at Fox Business, has noted that there has been a significant change in mood regarding the SEC’s stance on Ethereum ETFs. 

Insiders suggest that the SEC, under Chairman Gary Gensler, is less engaged in discussions about Ethereum ETFs compared to their Bitcoin counterparts, hinting at a possible contentment with the progress made with Bitcoin ETF approvals. 

Additionally, political pressure from figures like Senator Elizabeth Warren, who have expressed dissatisfaction with the SEC’s approval of Bitcoin ETFs, seems to be influencing the regulator’s approach toward Ethereum products. 

Regulatory delays 

The SEC has recently postponed its decision on various Ethereum ETF proposals, including those from financial giants BlackRock and Fidelity. This has set the stage for further uncertainty despite the fact that such an outcome was expected by market analysts. 

This delay signals a cautious approach from the SEC, mirroring its previous hesitance with Bitcoin ETFs. 

As reported by U.Today, Eric Balchunas, a senior analyst at Bloomberg, has tempered expectations for Ether ETFs, likening them to an opening act following a headliner. Jake Chervinsky, Variant’s chief legal officer, speculated the SEC’s cautious approach is influenced by political resistance and market volatility. 

Despite this, the crypto industry remains hopeful, looking for signs of potential approval in the regulator’s future actions and commentary. 

Oil touched the lowest levels of March today but bounced back and was solidly higher mid-way through US trading before fading to finish nearly unchanged at $77.93.

WTI crude has been flirting with $80 for two weeks but hasn’t been able to break though, despite some positive headlines. It might take a round of US dollar weakness to make it happen, or tightening inventory data. There is some focus today on demand estimates after Saudi Arabian hinted at lower demand growth than OPEC. The thinking is that OPEC is poised to lower its estimates.

At present, OPEC sees 2.25 mbpd in growth compared to 1.22 mbpd at the IEA. That difference is a big part of remaining OPEC spare capacity.

On the chart, there is still a nice series of higher lows but the bulls will want to see higher highs before the month is through.

Last week, we witnessed the price of spot gold (XAU/USD) refresh all-time highs (ATHs), comfortably north of the $2,000 mark at $2,195.

Markets witnessed demand for the precious metal increase based on several factors, which has seen buyers lift prices higher for eight consecutive days.  Last week, the largest one-week gain was recorded since early October 2023.

Gold Demand

Factors underpinning gold include rate expectations forecasting that the US Federal Reserve (the Fed) will step up and begin loosening policy. As of writing, the OIS curve has priced in the first 25 bp cut in June, with approximately 100 bps of cuts for the year (four rate cuts). You may remember from the Fed’s latest dot plot that the Fed projected three rate cuts this year.

The anticipation of lower rates in the US, coupled with lower (real) yields and US dollar (USD) trading on the back foot (MTD, the buck is lower by -1.3% according to the US Dollar Index), along with speculative trend trading, has contributed to the precious metal’s appeal.

Trend-Follower’s Market

Much like the price of BTC/USD and the S&P 500 right now, following XAU/USD’s ATH last week, trend-following strategies will seek a correction and possible dip-buying opportunity in anticipation of further record highs.

Keeping things simple, the Relative Strength Index (RSI) on both the weekly and daily charts exhibit overbought conditions (the daily chart is approaching indicator resistance as far north as 87.21, a level not showing itself since August 2020), which highlights a potentially overheated market. This, in addition to the clear uptrend we are in now, could prompt a correction in this market to retest the previous ATH at $2,147.

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Should a correction to $2,147 emerge, how one pulls the trigger will be trader-dependent. Some will seek additional confirmation. This might be in the form of a news event that should bolster gold; we have US CPI tomorrow, for example, and should we see a notable miss, this is likely to trigger a dovish repricing and weigh on the dollar and, by extension, further strengthen gold. Alongside this, a technical trigger will likely be employed (it could be anything from a basic bullish candlestick configuration to a more advanced assessment of the approach to the level [think AB=CD patterns]).

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In a recent exchange on X, Joe Weisenthal, the co-anchor of What’d You Miss? on Bloomberg Television, delved into the explosive growth and speculative nature of meme coins, comparing their rapid ascent to the traditional equities market. 

Weisenthal stressed the unique appeal of meme coins, noting their capacity for delivering outsized returns that traditional investments rarely match.

“Memecoins fill the demand for extremely asymmetric bets in a way that almost no equity could satisfy,” he noted.

His comments were in response to discussions on the regulatory challenges and potential of meme coins in today’s financial landscape.

The attraction and risks of meme coins

Doug Colkitt, founder of Ambient Finance, recently sparked a conversation by critiquing the nihilistic tendencies within the meme coin craze and pointing out regulatory obstacles in accruing value on-chain.

He envisioned a scenario where small businesses could easily access global capital markets through token issuance, contrasting this with the current pursuit of low market cap meme coins. 

Weisenthal responded by questioning the likelihood of creating productive businesses versus quick flip scams in such a deregulated environment. 

He argued that many meme coins are indeed considered scams due to their lack of underlying productive enterprise. However, the phenomenon represents a deeper desire among people to engage with investments in a more traditional, hands-on manner.

Rethinking investment and regulation

Weisenthal and Colkitt’s debate extends beyond the meme coin frenzy to address broader issues in financial regulation and investment strategies. 

Despite acknowledging the high failure rate among small businesses and the prevalence of scams, Colkitt also argued that a more open market could foster genuine company growth. 

Weisenthal countered, warning against the complete dismantling of equity capital market regulations. He implied that despite the speculative nature of meme coins, they are part of a larger discourse on how modern financial practices may be disconnecting investors from tangible enterprise and growth opportunities.

Jiji is all over the Bank of Japan this week. The yen strengthened to start the week after a report that the BOJ is considering scrapping yield curve control and replace it with a QE program while hiking rates to 0% as soon as March 19.

The market is still skeptical with March 19 pricing at about 50/50.

More recently, Jiji was out with a report saying ‘many’ Japanese firms are offering ‘big’ pay highs.

“These companies include not only automakers and other manufacturers but also restaurant and other service operators and retailers,” the report says.

BOJ officials have repeatedly pointed to spring wage negotiations as a key metric before exiting negative rates.

I would say there’s a good reason for the BOJ to move but the market has been burned by sources reports on the BOJ for months.

On Monday, the UK’s energy watchdog, Ofgem, initiated a consultation to solicit ideas and strategies for safeguarding consumers from the ongoing burden of high energy costs while also addressing the escalating concern of an unprecedented £3.1 billion (approximately $3.98 billion) in accumulated unpaid energy bills.

Despite a recent downtrend in energy prices, the financial strain on numerous households persists, with Ofgem reporting a notable increase in consumer debt related to energy bills last month.

Tim Jarvis, the Director General for Markets at Ofgem, highlighted the severity of the situation, stating, “The challenge of managing energy bills has reached critical levels for many, with debt reaching unprecedented heights. The aftermath of this situation threatens to leave a lasting impact, perpetuating the cycle of financial difficulty.”

Currently, Ofgem enforces a price cap to mitigate the financial burden on consumers, but the cap experienced a significant hike, reaching £3,549 annually for an average household in October 2022. This surge was primarily due to the global spike in wholesale energy prices following the geopolitical tensions triggered by Russia’s invasion of Ukraine, with the cap peaking at over £4,000 in January 2023.

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In response to the skyrocketing costs and to alleviate the financial pressure on households, the government subsidised energy bills, capping them at £2,500 per year for average consumption until the end of June 2023. At that point, Ofgem’s cap was adjusted to fall below this threshold.

Recognising the need for more targeted support, Ofgem has proposed the idea of a social tariff for household energy aimed at offering reduced rates to the most vulnerable segments of the population and those least capable of covering their energy expenses. However, implementing such a tariff would fall under the purview of the government.

To gather comprehensive insights and solutions, Ofgem has set a May 13 deadline for feedback from various stakeholders, including consumers, energy suppliers, consumer advocacy groups, charitable organisations, and debt management firms. This collaborative effort aims to explore practical measures to alleviate the financial strain on consumers and tackle the growing issue of energy debt in the UK.

Market Response to Inflation and Employment Data

Investors are closely monitoring the upcoming consumer price index (CPI) and producer price index (PPI) for February. These figures follow a January report that revealed higher-than-expected inflation, sparking concerns over persistent inflation and the possibility of delayed rate cuts by the Fed. The unexpected rise in the unemployment rate to 3.9% in February, despite strong job additions, has also contributed to market uncertainty.

Federal Reserve’s Policy Outlook

Amidst these mixed signals, the Fed is in a media blackout ahead of its rate-setting meeting next week. While there is anticipation of an interest rate cut, the timing remains unclear. Fed Chairman Jerome Powell hinted at impending rate cuts, but the decision hinges on further economic easing and inflation aligning with the target range.

Sector Performance and Individual Stocks

Information technology and communication services sectors led the losses, with significant declines in megacap stocks like Microsoft and Amazon. Notably, chip stocks such as Nvidia, AMD, and Broadcom experienced setbacks after recent gains, contributing to the overall market dip. Conversely, cryptocurrency and blockchain-related firms saw an uptick, paralleling Bitcoin’s record high.

Political and Corporate Developments

The upcoming 2024 U.S. presidential election is also shaping investor sentiment, with anticipation of a potential Biden-Trump rematch. Corporate developments, such as Boeing’s investigation-related decline and Equitrans Midstream’s rise following EQT Corp’s acquisition announcement, have also influenced trading patterns.

Market Forecast

Considering the current market indicators and pending economic data, the short-term outlook appears bearish. Investors are likely to remain cautious until there’s more clarity on inflation trends and the Federal Reserve’s interest rate decisions. The overall sentiment is leaning towards a cautious approach in anticipation of more concrete economic indicators.

Technical Analysis