🤯 Macron vs. Le Pen: Who Will Lead France into the Crypto Age?

Good Morning!

Crypto markets are up as BTC looks to test $65,000 level. Political news dominate the headlines with the first round of French 🇫🇷 elections starting yesterday and UK 🇬🇧 elections coming up Thursday.

In today’s email:

• French Elections: The euro saw its biggest intraday gain in over two weeks.

• Money Printers go Brrr: Despite the Federal Reserve delaying rate cuts, most major central banks are on a path to lower borrowing costs.

• CZ: Judge allows the SEC to pursue most of its allegations.

• Crypto Tax: New US tax rules for crypto kicking in 2025

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THE BIG IDEA

Macron and Allies Unite to Thwart Le Pen's Far-Right Surge in French Elections

French President Emmanuel Macron’s centrist alliance and the left-wing New Popular Front are contemplating pulling their candidates from the second round of the legislative election on July 7 to prevent Marine Le Pen’s far-right National Rally from gaining power. In the first round, the National Rally led with 33.2% of the vote, followed by the New Popular Front with 28% and Macron’s coalition with 20.8%. The markets reacted positively to the National Rally’s smaller-than-expected margin of victory.

Winning an absolute majority in the second round would allow the National Rally to easily pass legislation and appoint their leader, Jordan Bardella, as Prime Minister. Traditionally, French mainstream parties have united to keep the far right out of power. Prime Minister Gabriel Attal emphasized the need to prevent the National Rally from gaining an absolute majority.

Financial markets showed significant movements

Futures on France’s CAC 40 index surged nearly 3%, the euro saw its biggest intraday gain in over two weeks, and France’s 10-year bond yields narrowed their spread over German bonds. The French political landscape is now in a period of intense negotiations as parties strategize to maximize their chances in the final vote.

Jean-Luc Mélenchon of the New Popular Front has encouraged third-placed candidates from his group to withdraw to support other mainstream parties against the National Rally. Macron’s Renaissance party also plans to pull candidates where they finished third to aid those who respect republican values. However, this strategy is complicated by the differing fiscal policies of the left-wing alliance and Macron’s centrist party.

If credible alliances form to block Le Pen from securing absolute power, French markets could see further recovery. The political maneuvering in the coming days will be crucial in determining the balance of power in France’s government.

MARKETS AT A GLANCE

TOP NEWS

Global Easing Continues Despite Fed's Rate-Cut Delay

Despite the Federal Reserve delaying rate cuts, most major central banks are on a path to lower borrowing costs. The Bank of Japan is an exception. By the end of 2025, global benchmark rates are projected to drop by 155 basis points. The easing trend is not swift or synchronized, reflecting cautious approaches to lingering inflationary pressures.

24-Hour Stock Trading Rattles Wall Street

The rise of 24-hour stock trading is shaking Wall Street, driven by platforms like Robinhood and Interactive Brokers. While this trend meets retail investor demand for round-the-clock access, industry veterans express concerns about illiquidity and potential market manipulation during off-hours. The SEC is reviewing applications for continuous trading, emphasizing the need for fraud protections and central clearing. The move could further shift global capital towards US equities.

Ten Things to Watch in the UK General Election Results

The UK general election results are approaching, with key aspects to monitor. Noteworthy are the performances of the major parties in traditional strongholds, the impact of tactical voting, and the success of smaller parties. Additionally, watch for regional dynamics, the influence of recent scandals, and voter turnout. The results will shape the UK's political landscape and indicate future policy directions.

CRYPTO

Judge Rules SEC Case Against Binance and Zhao Can Proceed

A judge has ruled that the majority of the SEC's case against Binance and its CEO, Changpeng Zhao, can proceed. The SEC accuses Binance of violating securities laws and misleading investors. This ruling allows the SEC to pursue most of its allegations, intensifying scrutiny on one of the world's largest cryptocurrency exchanges and its operations.

Bitcoin faces potential resistance at $65,000 due to short-term holders' breakeven liquidation, while long-term holders remain bullish despite recent market corrections

Bitcoin's price recovery is challenged by potential resistance at $65,000, where short-term holders, currently in the red, may sell to break even. Meanwhile, long-term holders, with an average cost basis significantly lower than current prices, are likely to hold or increase their holdings, viewing recent corrections as normal in a bullish market cycle.

The SEC has sued Consensys

The SEC's lawsuit accuses Consensys of operating MetaMask as an unregistered securities broker due to its Swaps feature and facilitating transactions involving crypto assets deemed securities. The agency also scrutinizes MetaMask's staking service, powered by Lido and Rocket Pool, labeling their liquid staking tokens as unregistered securities, despite ongoing disputes over regulatory jurisdiction in the crypto space.

U.S. Treasury has introduced new tax regulations for cryptocurrencies starting in 2025

The rules requiring brokers to file 1099 forms and track customer transactions. However, rules for decentralized finance (DeFi) and non-custodial wallets are delayed pending further study of public comments. The IRS will exempt routine stablecoin sales below $600 annually from reporting and will aggregate NFT proceeds unless exceeding $600. The regulations aim to enhance tax compliance amidst ongoing industry debate over digital asset classifications.

VanEck and 21Shares have filed for solana ETFs, a move seen as anticipating a potential Trump presidency, which could favor crypto-friendly policies

The applications face obstacles under the current SEC, citing the lack of a regulated derivatives market for solana. However, the deadline for approval falls into a potential Trump administration, aligning with recent pro-crypto signals from Trump's camp.

Europe's introduction of the Markets in Crypto-Asset Regulation (MiCA) represents a comprehensive regulatory framework aimed at digital assets

It covers all aspects of the crypto market, including stablecoins, and emphasizes consumer protection and economic sovereignty. MiCA's impact includes setting standards for stablecoins, licensing requirements for digital asset service providers, and harmonizing regulations across the EU. It poses a challenge for the U.S., which lacks similar federal regulations, prompting discussions on potential alliances and the need for U.S. leadership in global financial services innovation.

The U.S. Securities and Exchange Commission (SEC) has returned S-1 forms to prospective Ethereum ETF issuers, marking a step back in the process

The forms were returned with light comments, requiring issuers to address these issues and refile by July 8. This round of feedback indicates that at least one more filing round will be necessary before the ETFs can be approved for trading. The process involves multiple steps, with the initial 19b-4 forms approved earlier, but the timing for the final approval and launch of the ETFs remains uncertain, pending further SEC review and deadlines.

GOLD

UBS predicts silver prices may drop short-term to USD 27.5/oz or USD 26.1/oz due to strong USD and reduced futures positions. 

Expectations of Federal Reserve rate cuts from September could reverse this, bolstered by industrial demand (especially photovoltaics) and declining mine output. UBS advises selling downside risks near USD 26.1/oz.

Gold and energy, particularly oil, are highlighted by Goldman Sachs Research as top commodities for hedging inflation.

Gold guards against high inflation and geopolitical shocks, benefiting from central bank demand. Energy, especially oil, historically offers robust real returns amid inflation surprises, driven by supply and demand shocks. Agriculture and industrial metals also provide inflation protection, responding to various economic shocks like energy supply disruptions and demand increases, respectively. Each commodity type responds uniquely to inflationary pressures and market conditions.

DAILY ECONOMIC CALENDAR (ET)

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