🎢 Crypto Rollercoaster: Fed's PCE Report and Solana's Wild Ride! 💸

Good Morning!

Following the first presidential debate, Donald Trump's chances of winning the 2024 election jumped to 67% on Polymarket. This reflects growing skepticism about President Biden's candidacy, with his odds of being the Democratic nominee falling to 69%. Blockchain bettors were unimpressed with Biden's performance, pushing his likelihood of dropping out to 43%.

Gavin Newsom's odds have increased to 17%, and Michelle Obama is at 7%. The debate caused a spike in Polymarket traffic, briefly causing downtime. Trump and Biden-related tokens on PoliFi also saw significant declines. The stock market remains steady for now, but investor caution is advised as the election approaches.

In today’s email:

• US May PCE: All eyes this morning on Fed’s favourite inflation measure

• Solana ETF: VanEck filed for the first Solana (SOL) ETF in the U.S.

• USDC on Base: Coinbase has partnered with Stripe to enable USDC stablecoin transfers on Base

• Fed on economy: Fed’ Barkin notes consumer resilience and low unemployment as key factors supporting economic stability amid high interest rates

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THE BIG IDEA

The May PCE inflation report, set for release at 8:30 a.m. Eastern on Friday, is anticipated to show stability in consumer price growth.

Economists project no change from April's figures, with the headline PCE price index expected to maintain a 2.6% year-over-year increase, down slightly from April's 2.7%.

Core inflation, which excludes volatile food and energy prices, is forecasted to edge up by 0.1% from April, aligning with a 2.8% year-over-year increase.

Crucial Data

This data is crucial for the Federal Reserve as it navigates monetary policy decisions. Fed officials are keenly watching these numbers to gauge whether inflation is aligning with their target of 2% annually.

A confirmation of stable or slightly lower inflation could support the case for maintaining current interest rates, with expectations tempered for any imminent rate cuts unless economic data significantly diverge from forecasts.

Recent trends in inflation have shown moderation from earlier peaks in 2022, and if the projections hold, May's PCE report may continue this downward trajectory.

Market participants are closely monitoring these indicators, as they could influence Fed policy adjustments later in the year, potentially impacting financial markets and investor sentiment.

MARKETS AT A GLANCE

TOP NEWS

Thomas Barkin, President of the Richmond Fed, believes the US economy remains resilient despite ongoing inflation challenges. 

He noted that consumer resilience and low unemployment are key factors supporting economic stability amid high interest rates. Barkin emphasized ongoing inflation concerns, acknowledging that while recent economic strength suggests a possible shift in long-term supply-demand dynamics, policy may need adjustment as inflation remains a persistent issue.

Global markets show mixed movements as European stocks waver ahead of France’s parliamentary election, impacting investor sentiment.

US equity futures rise in anticipation of key inflation data, while Asian stocks climb, led by gains in Japanese, South Korean, and Chinese shares. The dollar remains steady near an eight-month high, influenced by market perceptions of the US presidential debate outcome. Commodities, including oil and base metals, see varied movements amid economic data expectations.

Japan is appointing Atsushi Mimura as its new vice finance minister for international affairs amidst ongoing yen weakness.

Mimura, currently director general of MOF’s international bureau, will succeed Masato Kanda. His role involves managing currency stability amid economic challenges, including global conflicts and inflation pressures from weak yen values. Mimura’s appointment, effective July 31, aims for policy continuity in navigating currency interventions and maintaining economic stability aligned with Japan’s broader financial strategies.

CRYPTO

A dormant whale wallet moved $61M in BTC to Coinbase, signaling potential bearish market pressures.

Early Friday, a long-dormant whale wallet moved 1,000 BTC worth over $61 million to Coinbase. This activity, coupled with other old hands selling coins, is contributing to bearish pressures in the crypto market. Bitcoin's price failed to sustain gains above $62,000, currently trading at $61,550. Analysts suggest these movements may be due to cashing out at high prices or speculative activities. Market volatility might increase following the release of the Fed's preferred inflation gauge.

VanEck's filing for the first U.S. Solana ETF has driven SOL up 8%, marking a significant move in the crypto ETF market.

Asset manager VanEck filed for the first Solana (SOL) ETF in the U.S., following a similar filing in Canada six days earlier. This news boosted SOL by almost 8%. VanEck, known for pioneering crypto ETFs, sees Solana as a commodity akin to Bitcoin and Ethereum due to its utility in transaction fees and computational services. Analysts speculate that serious discussions on Solana ETFs might start in 2025.

Steno Research predicts ether could hit $6,500 later this year driven by strong inflows into spot ETFs, expected to reach $20 billion in the first year.

Steno Research forecasts $15-20 billion in net inflows into spot ether ETFs in the first year, pushing ether's price to $6,500 by year-end. The SEC's approval of these ETFs is imminent, potentially starting trades as soon as next week. Analysts believe these inflows will significantly impact ether due to its lower market cap and liquidity compared to bitcoin. Galaxy Research and Bitwise have more conservative inflow estimates but agree on the positive market impact.

Coinbase partners with Stripe to enable USDC transfers on Base, enhancing fiat-to-crypto on-ramps and broader crypto payment adoption.

Coinbase has partnered with Stripe to enable USDC stablecoin transfers on Base, Coinbase's blockchain project. Stripe's fiat-to-crypto on-ramp, now integrated with USDC on Base, will be added to the Coinbase Wallet, allowing users to buy USDC with credit cards and Apple Pay. This move marks Stripe's latest effort to reintroduce crypto payments, following its previous initiatives with USDC. Coinbase's Base blockchain, launched in February, aims to bridge users to the wider crypto world.

Ether and Solana are gaining investor attention due to ETF hype, overshadowing Bitcoin's earlier surge from spot ETF launches.

As investor focus shifts to Ether and Solana amid the hype for upcoming US cryptocurrency ETFs, Bitcoin's dominance wanes. VanEck's Solana ETF filing sparked a rally, while Ether is outperforming Bitcoin this year. Analysts predict significant inflows for Ether ETFs, potentially reaching $5 billion in five months. The SEC's stance on spot-Ether ETFs has evolved, but regulatory uncertainty remains for Solana. Bitcoin, meanwhile, has seen its price cool after initial ETF-driven gains.

GOLD

ABN AMRO maintains $2000/oz target for year end

Per ABN Amor, the outlook for gold prices remains cautious despite earlier highs this year. While there have been sporadic supports such as speculative buying and central bank purchases, traditional drivers like central bank easing and US real yields have not upheld their usual influence.

The current market environment, including a lack of physical shortages and moderate ETF positions, suggests stability rather than significant price increases. Their forecast maintains gold at USD 2,000 per ounce by December 2024, reflecting subdued momentum and uncertain traditional relationships.

DAILY ECONOMIC CALENDAR (ET)

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