Weekly Market Update - Friday, September 8, 2023 - Spot Ethereum ETF Applications Filed, Visa to Use Solana for USDC Settlement, and New Crypto Accounting Rules Coming

Takeaways

• Bitcoin edges lower as SEC delays ETF decisions: Following a rush of excitement after Grayscale’s legal win against the SEC last week, bitcoin prices retraced below $26k USD as the SEC delayed its decisions on spot bitcoin ETF applications as expected.
• Spot ether ETF applications filed: ARK Invest and VanEck filed applications to launch a spot ether ETF with the CBOE. The applications are not expected to be considered until the SEC makes a decision on existing ether futures ETF applications.
• Visa boosts Solana, expanding USDC settlement to the network: Expanding USDC settlement to the Solana network will improve cross-border payment speeds, Visa said. The news pushed SOL prices higher.
• New crypto accounting rules ask for fair-value reporting: New rules are expected to be finalized by the end of 2023, and be implemented by the end of 2024. Microstrategy founder Michael Sayor said the move would reduce barriers for corporations holding crypto in their treasuries.
• Interest rates expected to remain at current levels: The market is expecting the Fed to keep interest rates steady at its next meeting later this month. In traditional markets, equities were pushed lower this week by rising oil prices as Saudi Arabia and Russia continue production cuts.

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Bitcoin Returns to Pre-Grayscale Levels, as SEC Delays ETF Decisions

The initial enthusiasm from Grayscale’s legal victory over the U.S. Securities and Exchange Commission (SEC) waned this week as the market digested the full extent of the news and the immediate impact of the court's decision.

The SEC also postponed its decisions on all outstanding spot bitcoin exchange-traded fund (ETF) applications until mid-October at the earliest. The move was widely expected given the SEC has multiple deadlines and can open active ETF applications to public comments, but led to a retracement in bitcoin (BTC) prices nonetheless.

After hitting $28k USD, BTC has since returned to pre-Grayscale news levels, sitting around $25.9k USD as of Friday, reflecting the range we have seen over the past few weeks.

Spot Ether ETF Applications Filed With the SEC as Crypto ETF Push Continues

ARK Invest and VanEck filed applications with the SEC for a US-based spot ether ETF on Wednesday. The ETFs would be listed on the CBOE’s BZX Exchange. ARK’s application was submitted jointly with 21Shares.

The applications are similar to those filed for the spot bitcoin ETFs earlier this year. Using the bitcoin futures ETF approval as precedent, The SEC would likely approve ether futures ETFs before the spot ETFs are considered.

Ether (ETH) prices moved briefly higher on the news, reaching ~$1,670 USD and 0.0641 on the ETHBTC pair, before seeing a reversal shortly after.

Visa Expands USDC Settlement to Solana

On Tuesday, Visa announced that it will expand its settlement of USDC to the Solana network. Visa has been using USDC since 2021, but up until now, its stablecoin capabilities have been limited to Ethereum. Visa’s Head of Crypto, Cuy Sheffield, said that Solana will help “to improve the speed of cross-border settlement” and will provide a “modern option for our clients to easily send or receive funds from Visa’s treasury.”

On Tuesday, Solana (SOL) prices rallied from a low of ~$19.05 USD to a high ~of $20.59 USD, an around 8% jump, although SOL has since retraced back below the $20 USD mark.

New Crypto Accounting Rules to Require Fair-Value Reporting

On Wednesday, The United States Financial Accounting Standards Board (FASB) unanimously approved changes to how companies value their crypto holdings. The new rules will mean that companies holding BTC and certain other cryptos will have to report their holdings at fair value.

Under previous practice, companies were required to keep impairment losses on their balance sheets even if the token had regained its value. The new measures aim to capture the most up-to-date value for the digital assets, including if the price recovers after a dip. Microstrategy founder and former CEO, Michael Saylor, tweeted following the news saying that the move “eliminates a major impediment to corporate adoption of BTC as a treasury asset.”

The final rules are expected to be finalized and approved by the end of 2023, and go into effect at the end of 2024.

Interest Rates Expected to Hold Steady, Oil Prices Weigh on Equities

Interest rates and inflation remain the main economic concerns for investors, with a strong majority expecting the Federal Reserve to hold rates steady at the Federal Open Market Committee (FOMC) meeting later this month. While economic data on consumer confidence, jobs, and inflation last week increased the likelihood of rates remaining steady, market participants will keep an eye on more updates on inflation and retail sales set to be released before the FOMC for further assurances.

Rising oil prices have impacted equities this week after Russia and Saudi Arabia announced that they would continue production cuts through to the end of 2023, pushing Brent crude oil prices to their highest level since last November.

-From the Gemini Trading Desk