Crypto Falls Amid Escalating Conflict in the Middle East, SEC Amends Complaint Against Binance

Takeaways

• Federal Reserve officials signaled the possibility of a September rate cut during their July meeting: But crypto prices pulled back after Iran pledged it would retaliate against Israel for assassinating Hamas leader Ismail Haniyeh on Iranian soil.
• Donald Trump expressed strong support for cryptocurrency at the Bitcoin Conference in Nashville: Trump pledged to set up a strategic bitcoin reserve, stop the US from selling its bitcoin, and fire SEC chair Gary Gensler if he gets re-elected.
• Cantor Fitzgerald CEO Howard Lutnick announced the firm's plan to establish a Bitcoin financing business with an initial $2 billion investment: The initiative aims to provide leverage to bitcoin investors and strengthen the cryptocurrency ecosystem.
• The nine US spot Ethereum ETFs saw $98.29 million in outflows on Monday, extending their negative flow streak: BlackRock’s ETHA and Fidelity FETH led the inflows, while Grayscale Ethereum Trust faced significant outflows.
• The SEC is looking to amend its complaint against Binance, which could delay a court ruling on the security status of specific tokens: This move involves third-party crypto asset securities and adheres to a court directive for further proceedings.

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Fed Signals Possible Rate Cuts, but Middle East Tensions Rattle Crypto Markets

Federal Reserve officials at their July meeting on Wednesday opted to keep interest rates unchanged at 5.25%-5%, after the personal consumption expenditures (PCE) price index, a key inflation measure, increased by only 0.1% in June. This brought the year-over-year rise to 2.5%, down from 2.6% in May, moving closer to the Fed’s 2% inflation target.

Federal Reserve chair Jerome Powell for the first time hinted at the possibility of cutting rates in September, saying the move is “on the table” if the US continues to make progress on inflation. That would mark the first time the Fed has cut rates in four years.

The announcement did not appear to have much impact on cryptocurrency prices. On Wednesday, bitcoin dropped about 2%, below $65,000, while ether dropped more than 1%, hovering above $3,200. The negative price action came after a New York Times report indicated that Iran will take retaliatory action against Israel after Israel assassinated Hamas leader Ismail Haniyeh in Tehran.

Trump’s Speaks at Bitcoin Conference, Makes Big Promises

Former US President Donald Trump reiterated his support for cryptocurrency over the weekend at the Bitcoin Conference in Nashville.

During a nearly hour-long speech to a throng of crypto enthusiasts, Trump promised that he would establish a “strategic bitcoin reserve” and halt the sale of the US's current bitcoin holdings if he’s elected in November.

Additionally, Trump stated he would remove the current Securities and Exchange Commission Chair, Gary Gensler – who has long been seen as hostile to crypto. However, it’s unclear if he would have the authority to fire Gensler before his term ends in 2026.

Despite Trump's pro-crypto stance, Trump-themed tokens have not fared well. The MAGA (TRUMP) token has fallen by around 10% over the past week.

Cantor Fitzgerald to Launch $2 Billion Bitcoin Financing Business

Howard Lutnick, CEO and Chairman of Cantor Fitzgerald, took the stage at Bitcoin 2024 to announce the firm's ambitious plan to launch a Bitcoin financing business with an initial investment of $2 billion. This venture aims to provide leverage to investors holding Bitcoin, potentially positioning Cantor Fitzgerald as a significant player in the digital asset financing space.

Lutnick emphasized the firm's commitment to integrating Bitcoin into the global financial markets, stating, “We are going to welcome Bitcoin into the financing family of the global financial markets.” He highlighted the firm's dedication to building a premier platform for Bitcoin financing, collaborating with top custodians, and supporting the Bitcoin ecosystem. The operation is set to begin with $2 billion, but the firm reportedly plans to increase the financing in $2 billion increments as the business grows.

In addition to this announcement, Lutnick defended Tether, the stablecoin in which Cantor Fitzgerald acts as custodian. He offered reassurance of Tether's stability and Cantor Fitzgerald's role in ensuring the security and integrity of the most popular stablecoin.

US Spot ETH ETFs Record Fourth Day of Negative Flows

On Monday, the nine US spot ether ETFs recorded $98.29 million in net outflows, marking the fourth consecutive day of negative flows. The Grayscale Ethereum Trust (ETHE) was the most affected, with $210.04 million in net outflows, continuing its trend of substantial daily outflows since its launch.

In contrast, BlackRock’s ETHA led the inflows with $58.17 million, followed by Fidelity FETH, which saw $24.82 million in net inflows. VanEck ETHV and Bitwise ETHW recorded $10.91 million and $10.45 million in net inflows, respectively. Grayscale Ethereum Mini Trust also logged $4.9 million in net inflows, while Franklin’s EZET had $2.52 million.

Despite the trend of net outflows, the total daily trading volume for spot ether ETFs was still a healthy $773.01 million on Monday however – indicating notable trading interest in the instruments. The 11 spot bitcoin ETFs in the US, on the other hand, experienced $124.13 million in net inflows on Monday. BlackRock’s IBIT stood out with $205.62 million in net inflows, however, it was the only bitcoin fund to record positive net inflows on that day.

SEC Seeks to Amend Binance Complaint

The Securities and Exchange Commission has announced plans to amend its initial complaint against Binance, which could impact the need for a court decision on whether certain tokens, such as SOL, qualify as securities. The SEC expressed its intent to seek approval to revise its complaint, focusing on "Third Party Crypto Asset Securities," as detailed in its November opposition to Binance's motion to dismiss. This proposed amendment aims to remove the necessity for the court to decide on allegations concerning whether certain tokens are securities. The specific tokens involved include SOL, ADA, MATIC and ATOM amongst others, which the SEC alleges were marketed and sold as securities on Binance's platform.

The move comes as founder and former CEO of Binance, Changpeng Zhao, continues to serve a four-month prison sentence after pleading guilty to money laundering charges last year. Zhao is due to be released on September 29th this year.

-The Gemini Team