 | 5/1/24 |
Stablecoins have grown into a roughly $160 billion market with nearly 30 million monthly users.
What’s up? It’s Coinbase Bytes
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
- Bitcoin fell under $57K. How inflation fears and ETF outflows factored into the crypto market’s drawdown.
- Global payments firms are embracing stablecoins. Stripe and PayPal just announced major moves.
- This week in numbers. Pantera Capital’s massive new crypto-focused fund, the BTC transaction fees that Runes generated in its first week, and more stats to know.
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Price changes are for the past week, ending on May 2, 2024 at 02:22 AM UTC
 | MARKET BYTES |
Why were crypto prices down this week?
Crypto’s 2024 rally ran into some rocky weather this week, as economic fears and growing global instability put pressure on markets of all kinds.
As of mid-day Wednesday, bitcoin was whipsawing between $57,000 and $59,000 after the Federal Reserve outlined plans to hold interest rates steady following last month’s stubborn inflation numbers. BTC ended the month of April down more than 12% — its first down month since August 2023.
Here are three market updates to know.
1: Markets cool as inflation fears rise
As was widely expected, the Federal Reserve declined to cut interest rates at Wednesday’s meeting, holding them at two-decade highs between 5.25% and 5.5%. In a press conference after the decision, Fed Chair Jerome Powell said “inflation is still too high, further progress in bringing it down is not assured, and the path forward is uncertain.”
Crypto and stock markets regained some ground after Powell indicated it would be “unlikely” that the central bank’s next move would be another rate increase.
Lower interest rates tend to be correlated with higher prices for a wide range of assets, including crypto — although markets are complex and the current economic picture has defied conventional wisdom in a variety of ways.
For instance, despite historically high interest rates, inflation has ticked back up, jobs markets have continued to heat up, and consumer spending remains high.
- Why it matters… In December, Powell indicated that the Fed would cut rates several times in 2024 as it seeks to steer the economy to a “soft landing.” Now, as the odds of cuts have seemingly declined, market optimism may be cooling.
2: Crypto ETFs make quiet debut in Hong Kong
In January, when bitcoin ETFs began trading on U.S. exchanges, they gave a massive boost to crypto markets, helping drive BTC to a new all-time high. On Monday, six new products holding BTC and ETH debuted in Hong Kong, but the impact was a lot less pronounced.
In their first day, the ETFs collectively tallied around $12.7 million in trade volume. By comparison, the U.S. ETFs notched about $4.6 billion in the first day.
It’s important to note that the ETFs’ biggest potential customer base, mainland Chinese residents, aren’t allowed to purchase the products. And even if the early impact of the ETFs has been muted, they serve as an important early step in Hong Kong’s long-term plans to become a regional crypto hub.
- Up next for global ETFs? Australia’s biggest stock market, the ASX 200, is expected to allow crypto investment products to begin trading by the end of the year.
3: U.S. ETF inflows have slowed
In recent weeks, the flow of new capital into U.S. bitcoin ETFs has slowed, putting downward pressure on crypto markets generally.
According to a CoinShares report published on Monday, crypto investment products saw weekly outflows totalling $435 million, the most since March.
Digging into the numbers, however, a vast majority of outflows came from Grayscale’s legacy Grayscale Bitcoin Trust, which has the highest fees of any product. (The firm launched a new low-fee alternative last week.) Many of the new ETFs, including popular products from BlackRock and Fidelity, saw modest inflows.
- Analyze this… According to a Bernstein report, the ETF slowdown is just a “short-term pause,” and as the ETFs become increasingly available to wealth advisors and brokerage platforms, BTC will begin ticking upward toward the bank’s price target of $150,000 by the end of the year.
| STABLECOIN SPOTLIGHT |
Stripe, PayPal among the payments giants embracing stablecoins
Global payments giants are increasingly supporting stablecoins — cryptocurrencies that have their prices pegged to a reserve currency, typically the U.S. dollar.
Stripe, the payments firm that processed more than $1 trillion last year, just announced that merchants on its network can begin accepting USDC this summer. PayPal, which processed $400 billion in Q1 of this year alone, will enable cross-border transfers for its stablecoin users. And Ripple, the company behind the XRP token, recently announced plans to launch its own USD-denominated stablecoin.
As crypto continues to be embraced globally for its potential to speed up transaction settlement times and cut costs, the “stablecoin wars” — as one outlet put it — are rapidly heating up.
Stripe plans to process stablecoin payments on Ethereum, Polygon, and Solana
After a six-year hiatus from accepting crypto payments, the payment-processing giant plans to begin accepting USDC this summer.
Merchants will be able to accept USDC payments that will automatically convert into fiat currency, allowing vendors anywhere (even those without a traditional bank account or credit card) access to global ecommerce.
While USDC is natively supported on 16 blockchains, Stripe’s new initiative will begin by supporting payments via Ethereum, Solana, and Polygon. But the company said a “final, more expansive” list will be announced closer to launch.
John Collison, Stripe’s co-founder, called the stablecoin integration a sign of crypto’s growing global utility: “With transaction speeds increasing and costs coming down, we’re seeing crypto finally making sense as a means of exchange.”
PayPal has enabled cross-border stablecoin transfers
Stripe isn’t the only fintech giant incorporating crypto into its payment rails.
Last summer, PayPal became the first publicly traded company in the U.S. to have its own stablecoin when it launched PYUSD. Since then, more than $300 million in PYUSD has come into circulation.
This week, the payments giant announced that its money transfer service, Xoom, will allow U.S. customers to make stablecoin transfers to approximately 160 countries with zero transaction fees.
Remittance payments — in which individuals send money to family and friends abroad — comprise a $781 billion global market. Americans spend nearly $12 billion in fees sending money abroad each year.
Stablecoin demand is picking back up in a major way
The flurry of stablecoin integrations come as the stablecoin market nears its highest levels of supply in nearly two years.
Currently, the stablecoin market cap sits near $160 billion, just below its all-time high of $180 billion set in 2022. Stablecoins, with an average of nearly 30 million monthly users, process nearly as much transaction volume annually as Visa, according to recently released data.
Interestingly, data from Visa — which launched an onchain analytics dashboard that “showcases how fiat-backed stablecoins move via public blockchains globally” — shows that Circle’s USDC token has accounted for 50% of total transactions since January, even though it accounts for about 20% of circulating stablecoins.
“The data shows Circle’s USDC eating up market share since the start of 2024,” reported Bloomberg — adding that the token recorded $456 billion in transaction volume last week alone.
The bottom line…
Amid all the recent stablecoin activity, Rep. Maxine Waters (D-CA), the top-ranking Democrat on the House Financial Services Committee, told Bloomberg last week that she and committee chairman Patrick McHenry (R-NC) are on their way “to getting a stablecoin bill in the short run.”
While it's unclear when any such bill could be passed, clear legislation could further accelerate stablecoin adoption. In a recent note to investors, Matt Hougan, the CIO of asset manager BitWise, argued that if stablecoin legislation were to pass, “crypto is poised to take another huge leap into the mainstream.”
| NUMBERS TO KNOW |
$1 billion
Venture capital firm Pantera Capital’s fundraising goal for a new crypto-focused fund that would, per Bloomberg, invest in “startup equity, early-stage tokens, liquid tokens, and other assets.” Pantera, which manages $5.7 billion in assets, launched the first-ever crypto venture fund in 2013.
$135 million
Approximate amount of transaction fees that the buzzy Runes protocol generated on the Bitcoin network in its first week. Runes, which launched the same day as the Bitcoin halving, enables the creation of tokens on top of BTC’s blockchain.
122
Number of BTC that MicroStrategy added to its balance sheet between April 1 and April 26. The software firm, which is the largest corporate holder of bitcoin, now has a total of 214,400 BTC (worth around $13.6 billion) — more than 1% of bitcoin’s total supply.
1 in 5,500
Estimated odds an amateur miner overcame last week to add a new block of data to Bitcoin’s blockchain and claim a 3.125 BTC block reward and fees (worth about $218,544 at the time). In Bitcoin’s early years, anyone with a decently powerful PC could feasibly participate in mining; these days the industry is powered by vast mining farms full of specialized equipment.
| TOKEN TRIVIA |
Which of the following is a Bitcoin layer 2?
| A | Lightning Network |
| B | Base |
| C | 2Bit 2Furious |
| D | Shardnado |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| ARKM |  |  |
Arkham is a blockchain intelligence platform that provides entity-level insights through onchain data analysis.
| SHDW |  | |
The Shadow ecosystem is a decentralized physical infrastructure network developed by GenesysGo.
| TNSR |  | |
The Tensor Protocol is an autonomous protocol on Solana that NFT marketplaces can use to access deep liquidity and connect their users with other NFT traders.
| NEON |  | |
Neon EVM, the first parallelized EVM on Solana, allows developers to seamlessly deploy Ethereum dapps to Solana.
Trivia answer
| A | Lightning Network |
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