Ethereum May 2024 Update

Market Commentary:

In May, markets rose as inflation declined but remained elevated above the Federal Reserve’s 2% target rate. The latest Consumer Price Index (CPI) slowed for the first time this year, showing overall prices increasing 3.4% YoY compared to the reported 3.5% in March. Moreover, core inflation (which strips out food and energy prices) rose 3.6% YoY compared to 3.8% in March. Housing is the sector garnering the most attention as it was the largest factor in the core CPI’s monthly increase while rent prices rose 0.4% for the third straight month. The Producer Price Index (PPI) rose 0.5% (above the expected 0.3%) largely due to a jump in services. This comes after March’s PPI saw a 0.1% dip (revised down). Fed officials will likely need more signs of cooling inflation before lowering interest rates.

While the US economy seemingly remains sturdy, data showed retail sales were flat in April while March’s data was revised downward to 0.6% (from 0.7%). This conveys that consumer spending is coming off its high point, which the Fed would like to see if it wants to decrease interest rates later this year. Odds of a rate cut have slightly increased to an estimated ~50% chance in September. The S&P 500 hit an all-time high of 5,321 and ended the month 4% up; similarly, the NASDAQ rose 5%, resuming its upward trend for 2024. Gold remained steady, hitting an all-time high of $2,436 before retracing to $2,346. 

The aforementioned macro factors, while positive for stock prices, did not help ETH as much. However, an unexpected last-minute SEC approval for a US spot ETH ETF. pushed ETH to this quarter’s high. While this is a win for the crypto industry, we won’t see these ETFs trading until the SEC reviews S-1 registration statements filed by fund issuers, a process that could take weeks. The SEC's decision comes after a winding road of speculation and debate, with recent political developments and amendments to filings potentially influencing the outcome. The expectation and subsequent approval saw ETH end the month at $3,760 a 25% climb from the end of April.

On the US political aisle, there were a few noteworthy events in May. Donald Trump expressed support for cryptocurrencies during an event with his NFT buyers at Mar-a-Lago and his campaign now accepts crypto donations. 

The Senate voted to overturn the SEC’s SAB121, an accounting rule that would have made it more difficult for firms to custody digital assets. The U.S. House Approved the FIT21 Bill (279-136) – the first major cryptocurrency bill to pass the House. The bill now moves to the Senate, where its fate is uncertain due to a lack of a corresponding bill and unclear support. Further, the relevant Senate committees haven't engaged in the same level of scrutiny on cryptocurrency matters as the House. However, the importance is likely more symbolic of the shifting tides within the political crypto sphere and possibly the end of “Chokepoint 2.0”.