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- The Fed is unlikely to cut rates before the summer due to hotter-than-expected inflation and jobs data.
- Despite Dencun, ETH struggled to keep up with BTC amid changing sentiment.
- Memecoins soared, attracting users and trading volume.
- Crypto ETNs and BlackRock’s RWA fund supported the BTC price.
- The trading volume of spot Bitcoin ETFs nearly tripled despite GBTC outflows.
- The Bitcoin halving may trigger a rally lasting until late 2025.
As the US inflationary pressures remain, monetary easing projections are shifting further out into the future. As of April 2, 2024, CME FedWatch reflects a 4.5% chance of a rate cut in May, as opposed to 59% in June and 74% in July.
Across the pond, the Swiss National Bank (SNB) has lowered its rates by 25 basis points to 1.5%, getting ahead of global peers. Switzerland is the first major economy to cut rates amid declining inflation, while the Bank of England and the Fed kept their interest rates steady in March.
US inflation
In February, the PCE (Personal Consumption Expenditures) inflation inched up to 2.5%, a full ten bps higher MoM. The core index, which excludes volatile food and energy, rose 2.8% YoY and 0.3% from a month prior. That uptick was widely expected.
The core PCE guides the Federal Reserve’s decisions on potential rate cuts. Chair Jerome Powell has repeatedly confirmed the intention to launch the easing this year, giving investors hope for the rise of risk assets. At its March 20 meeting, the FOMC left the interest rate unchanged at 5.25%–5.5%, still targeting a 2% inflation rate.
Earlier in March, the CPI (Consumer Price Index) report revealed a hotter-than-expected core reading — up 3.8% YoY and 0.4% MoM in February versus the projected 3.7% and 0.3%, respectively. Concerningly, the headline index showed the largest monthly increase since September.
US labor market
The March jobs report, due on April 5, is expected to show 200,000 new jobs — below 275,000 in February but above the average pre-COVID-19 figures. In the five years leading up to the pandemic, the US economy added 191,000 jobs every month.
The forecasted rise would mark the 39th consecutive month of growth, with the labor market staying resistant to the Fed’s efforts. Furthermore, the unemployment rate could decline to 3.8% from 3.9%.
A strong jobs report may derail the Fed’s plans for rate cuts, as soaring wages may hinder its progress toward the 2% target. On the other hand, a surprisingly weak reading could accelerate the cuts as a measure to invigorate business activity and stave off a recession.
The crypto market showed substantial volatility in March. The institutional participation remained robust despite a noticeable decrease in spot Bitcoin ETF inflows.
The collective trading volume for the funds surged to $111B, nearly tripling since February ($42.2B). In April, the supporting impact of the ETFs will be combined with the Bitcoin supply halving.
BTC: Turbulence after new ATH
On March 14, BTC rocketed to a new all-time high of $73,737.94 before slipping to $60K within days. The coin exhibited resilience overall, gradually recovering value.
Despite the turbulence, the monthly returns (+16.81%) slightly exceeded the historical average (+13.42%), according to Coinglass data.
ETH: Plunge despite Dencun
Ether struggled to keep pace with Bitcoin. It significantly underperformed the monthly average (+22.86%), gaining just 9.33%. Unlike BTC, ETH failed to beat its ATH, topping out at $4070.60 on March 12.
The results fell short of expectations despite the much-anticipated Dencun upgrade, which slashed the transaction costs on Layer-2 networks. The downtrend toward the month’s end aligned with the BTC correction.
Memecoin rally
Memecoins acted as the main driving catalyst for market growth throughout March. Their surge signaled a paradigm shift, igniting interest in crypto beyond BTC and ETH, praised for real-world utility.
All memecoins in the top 100 by market cap saw sizable returns. Notably, dog-themed tokens rocketed in unison on community enthusiasm and speculative frenzy.
FLOKI (FLOKI) and dogwifhat (WIF) led gains at nearly 299% and 251%, respectively. Shiba Inu (SHIB) surged over 156%, while Dogecoin (DOGE), the top memecoin by market cap, gained just under 70%.
Solana’s scalability, low transaction fees, and vibrant ecosystem drive its dominance in this space. The appetite for memecoins fuelled the surge in activity, triggering a spate of failed or missing transactions. On March 16, the total trading volume eclipsed that of Ethereum by $1.1B, as reported by Cointelegraph.
Base also witnessed an uptick in use and retail investment. Jupiter’s trading volume and JUP token rocketed, solidifying its status as Solana’s key liquidity aggregator and a go-to platform for memecoin transactions.
Performance of spot Bitcoin ETFs
In March, the trading volume of spot Bitcoin ETFs nearly tripled, reaching $111B, with Grayscale and BlackRock dominating the market. Although outflows from Grayscale’s GBTC have surpassed $15B, the cumulative net outflows totaled $86M on April 1.
Bloomberg ETF analyst Eric Balchunas summarized, “While all of the ETFs won in terms of being profitable hits, $IBIT won the volume race and is officially the $GLD of Bitcoin.” As noted by CoinDesk, the ETFs have “completely altered” the Bitcoin markets, driving a rally to the new ATH in March.
Dencun and speculation around ether ETFs
Ethereum’s Dencun upgrade, completed on March 13, significantly enhanced Layer-2 networks, making them more scalable and cheaper to use. A new type of transactions — blob transactions — caused network fees to decline by as much as 90% (on Starknet). On Base, they sank from $0.31 to $0.0005.
Yet a price plunge followed, with the ETH supply languishing at its 2022 levels. The supply drop may stem from a rapid increase in Ethereum transactions and more fees burned. Historically, upgrades rarely swayed the price.
The price pattern aligned with the correction expectations based on sentiment changes and a less likely launch of spot ether ETFs. As of this writing, Polymarket indicates a merely 22% chance of approval by May 31.
Increased network activity and shrinking supply may support ETH in the future. However, it is “persistently dogged by its lack of name recognition among non-endemic investors,” as noted by Joseph Edwards, Head of Research at Enigma Securities.
VanEck’s filing for a spot ETF is the first in line for the SEC’s decision on May 23. The approval would spur institutional demand and the price — Standard Chartered Bank expects ETH to reach $8,000 by the end of 2024.
However, skeptics point to ether’s uncertain legal status — the SEC is yet to classify it as a commodity or security. Unlike Bitcoin, which is officially a commodity, ether is traded on a proof-of-stake blockchain, whose users earn a yield by locking up their coins.
Due to staking, ETH may be eventually deemed a security. Anders Helset, head of research at K33, concluded, “Getting the SEC on board to allow staked ether ETFs will be a very tough bargain and is, for now, extremely unlikely.”
Crypto ETNs on LSE
The London Stock Exchange has announced the launch of crypto ETNs on May 28. This move helped BTC fly past $71K on March 26.
The exchange-traded notes, linked to Bitcoin and ether, will only be available to professional investors with the approval of the UK regulator, the Financial Conduct Authority (FCA).
Applications for trading will be accepted from April 8. Although unrelated to retail, the LSE’s decision mirrors the SEC’s approval of spot Bitcoin ETFs in January 2024. The UK government’s intention to make the country a crypto hub is also well-known.
BlackRock’s RWA fund
The leading wealth manager has unveiled plans to launch a real-world asset (RWA) tokenization fund. Based on the Ethereum network and represented by the BUIDL token, the BlackRock USD Institutional Digital Liquidity Fund marks a seismic change.
This venture is poised to unlock a market reaching $16T by 2030 as institutional interest sets the stage for explosive growth. RWAs — tokens representing ownership of tangible assets, from bonds to real estate to commodities — democratize investment and enhance liquidity.
BlackRock’s fund is fully backed by cash, US Treasury bills, and repurchase agreements. Other corporate giants, including JPMorgan, Citi, and Bank of America, are also exploring the RWA technology. At present, most RWAs are stablecoins pegged 1:1 to the US dollar.
Bitcoin halving (April 19)
The Bitcoin blockchain is about to undergo its fourth halving — a quadrennial event that slashes the block reward. This time, it will shrink from 6.25 BTC to 3.125 BTC.
Every halving affects the profitability of Bitcoin mining, promoting network sustainability while decreasing the inflation rate. It is key to keeping the supply capped and finite at 21 million BTC.
That said, halvings do not occur in isolation: the BTC price also reacts to factors beyond supply, such as regulations, the Federal Reserve’s monetary policy, geopolitics, and more.
The previous halvings (in 2012, 2016, and 2020) occurred amid fundamentals underscoring Bitcoin’s strength as an alternative store of value: the EU debt crisis, the ICO boom, and pandemic-fueled inflation fears.
This time, a major driver is the embrace of spot Bitcoin ETFs. If history repeats itself, the post-halving rally should continue until late 2025. However, past performance is not indicative of future results.
💡 For a deep dive into the coin’s halving behavior, check out our ultimate guide to the 2024 Bitcoin halving.
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