Crypto News: Market Update May 2024
May 2024 brought a series of notable economic events and breakthroughs in the crypto world. From the Federal Reserve maintaining its interest rate policy to Bitcoin reaching a historic milestone, the month was marked by significant developments. Inflation in the United States showed signs of cooling, raising hopes for potential rate cuts later this year. Simultaneously, the crypto market experienced a major victory with the approval of the Financial Innovation and Technology for the 21st Century Act by the U.S. House of Representatives and the SEC’s approval of exchange applications for spot Ether ETFs. Here’s a detailed overview of the key market developments in May 2024.
May 1: The Fed Keeps Interest Rates Unchanged in May’s Rate Decision
On May 1, the Federal Reserve once again decided to keep interest rates unchanged in its ongoing fight against inflation. The federal funds rate remains between 5.25% and 5.50%, the highest level in more than twenty years. The Fed noted a lack of progress in bringing inflation down to the 2% target. Chairman Jerome Powell emphasized that inflation is still too high and that any future rate cuts will depend on upcoming developments.
The financial markets reacted positively to Powell’s remark that further rate hikes are unlikely. However, the Fed remains cautious, awaiting more certainty that inflation is decreasing before they start lowering interest rates. (Source: CNBC)
May 5: Bitcoin Reaches Milestone of 1 Billion Transactions
On May 5, 2024, Bitcoin processed its 1 billionth transaction, marking a significant milestone 15 years after its inception. The number of transactions on the Bitcoin network has surged over the past year, driven in part by new services like Ordinals and Runes, which have expanded the network’s use cases. This increase led to a record of 926,000 transactions in a single day, shortly after the introduction of Runes. While impressive, Bitcoin is not the first in the crypto world to reach such a milestone; Ethereum has already surpassed 2 billion transactions. This highlights the growing adoption of Bitcoin and other cryptocurrencies. (Source: Crypto Insiders)
May 15: U.S. Inflation Decreased in April Amid Slowing Domestic Demand
In April, U.S. consumer prices rose less than expected, with an increase of 0.3%. Year-over-year, the CPI increased by 3.4%, while the core CPI (excluding food and energy) rose by 0.3%, reaching 3.6% year-over-year. Flat retail sales indicate cooling domestic demand, increasing the likelihood of a Fed rate cut in September. The Fed has kept its interest rates unchanged at 5.25%-5.50% since July 2023.
Key factors contributing to the CPI increase were higher costs for housing and gasoline, while food prices remained unchanged (partly due to coffee no longer being included in food price calculations). Economists expect price pressures to ease in the coming quarters, bringing inflation closer to the Fed’s 2% target. Markets reacted positively to this data, with rising stocks and a declining dollar. (Source: Reuters)
May 22: U.S. House Approves Crypto FIT21 Act with Democratic Support
The U.S. House of Representatives has approved the Financial Innovation and Technology for the 21st Century Act (FIT21) with a vote of 279-136, with many Democrats crossing party lines to support the bill. This legislation is a significant milestone for the regulation of digital asset markets and designates the Commodity Futures Trading Commission (CFTC) as the primary regulator for non-securities markets. Despite opposition from President Joe Biden and SEC Chairman Gary Gensler, this marks the first time a major crypto bill has passed one of the chambers of Congress. However, the bill’s future in the Senate remains uncertain. (Source: CoinDesk)
May 23: U.S. SEC Approves Exchange Applications for Spot Ethereum ETFs
The U.S. Securities and Exchange Commission (SEC) has approved applications from Nasdaq, CBOE, and NYSE to list exchange-traded funds (ETFs) linked to the price of Ether. This marks a significant victory for both the applying companies and the crypto sector. The news came as a surprise, as the expectation had been that the SEC would reject the applications. Nine issuers, including VanEck, ARK Investments/21Shares, and BlackRock, are hoping to launch the ETFs. The approval follows the introduction of spot Bitcoin ETFs earlier this year. SEC Chairman Gary Gensler declined to comment on the approval. (Source: Reuters)
May 30: U.S. Consumers Slow Economic Growth in Q1, Inflation Cools Off
In the first quarter of 2024, the U.S. economy grew more slowly than previously estimated, with an annual growth rate of 1.3%, down from the initial estimate of 1.6%. This decline was due to downward revisions in consumer spending and a key inflation gauge, which decreased to 3.3%. This development supports the expectation that the Federal Reserve may lower interest rates by the end of the year. Consumer spending declined, particularly in durable goods such as motor vehicles, while business investments in technology increased. The labor market remains strong, with only a slight rise in unemployment claims, which continues to support the economy despite a reshuffling of labor conditions. (Source: Reuters)
May 31: Fed’s Preferred Inflation Gauge Rises in April as Expected
The Personal Consumption Expenditures (PCE) price index, excluding food and energy, rose by 0.2% in April and 2.8% year-over-year, slightly above expectations. Including food and energy, the annual PCE inflation rate was 2.7%, in line with forecasts.
Market reactions to this data were positive, with gains in both the stock and crypto markets and a decline in bond yields. While the PCE price index did not show significant progress in reducing inflation, no worsening was observed either. Investors remain patient, as the Fed is expected to wait for more favorable data before considering an interest rate cut, which is likely not to occur before September. (Source: CNBC)
Conclusion
The Federal Reserve maintained its interest rates despite ongoing inflationary pressures, while positive market reactions followed signs of cooling inflation. Bitcoin reached a historic milestone of 1 billion transactions, and the approval of the Financial Innovation and Technology for the 21st Century Act (FIT21) by the U.S. House of Representatives marked a significant step forward in crypto regulation. Additionally, the SEC’s approval of spot Ether ETF’s provided a major boost to the crypto sector.
