Ethereum ETFs, interest rate cuts, elections... HashKey analyzes three key factors driving the bull market recovery
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Ethereum ETFs, interest rate cuts, elections... HashKey analyzes three key factors driving the bull market recovery
Has the bull market already recovered? What major opportunities this year could trigger a surge in the bull market?
Navigating Web3 tides with focused insightsAuthor: Jeffery Ding, Chief Analyst at HashKey Group
If the use of Bitcoin during the 2013 Cyprus financial crisis marked cryptocurrency’s first appearance on the global stage, today—against a backdrop of intensifying geopolitical crises—crypto has moved to center stage. Nearly two decades since Satoshi Nakamoto released the Bitcoin whitepaper, crypto has evolved into a vast ecosystem distinct from traditional finance yet closely tied to macroeconomic trends. The total market capitalization of cryptocurrencies now stands at $2.4 trillion. If viewed as a single company, it would rank fourth globally, surpassing tech giants like Google and Meta.
After four weeks of sideways consolidation followed by declines, Bitcoin and Ethereum prices have recently rebounded. Has the bull market resumed? What key catalysts could drive a surge this year? This article analyzes the three most closely watched macro factors: spot Ethereum ETF approvals, Federal Reserve rate cuts, and the U.S. election.
Is a Spot Ethereum ETF Imminent?
The impact of Bitcoin ETFs is beyond dispute. After a decade-long back-and-forth between the SEC and applicants, spot Bitcoin ETFs were finally approved last year. Within just 40 days, they attracted $8.6 billion in inflows, propelling Bitcoin’s price from around $40,000 at the start of 2024 to $70,000.
The anticipated approval of a spot Ethereum ETF began showing its influence this week. Following reports that the SEC accelerated the review of 19b-4 filings for Ethereum ETFs and might make a complete U-turn on its stance—possibly approving one as early as Wednesday—Ethereum surged over 20% within eight hours, briefly breaking $3,700. In response, Bloomberg senior analyst Eric Balchunas raised his probability estimate for approval from 25% to 75%.
However, a major hurdle remains: regulators have yet to definitively classify Ethereum as either a commodity or a security. Currently, investor interest and demand for spot Ether ETFs have not reached the same level as those for Bitcoin ETFs. Moreover, Ethereum’s shift from proof-of-work (PoW), shared with Bitcoin, to proof-of-stake (PoS) increases the likelihood that U.S. regulators may classify Ether as a security rather than a commodity.
Additionally, Ethereum’s repeated network upgrades create a "Ship of Theseus" effect—after so many changes, the current Ethereum network is arguably no longer the same blockchain as before. SEC Chair Gary Gensler has historically shown little favor toward such evolving crypto assets.
Nevertheless, the market remains highly optimistic, primarily due to Ethereum’s appeal as an income-generating asset.
A successful launch of a spot Ethereum ETF could position it similarly to the “eighth-largest tech stock” in the U.S. If custodied ETH tokens can be used for on-chain staking, it would attract more institutional investors seeking yield-bearing assets—potentially making it even more attractive than Bitcoin ETFs. Therefore, the impact of an Ethereum ETF extends far beyond crypto itself, significantly boosting the broader Ethereum ecosystem and its projects.
Based on precedent, the fate of the spot Ethereum ETF may ultimately rest on a single vote by SEC Chair Gensler. In January, the approval of spot Bitcoin ETFs was decided by a five-member commission. Gensler cast the decisive yes vote, which many believe secured final approval. The same five SEC commissioners are scheduled to vote on VanEck’s spot Ethereum ETF application on May 23.
Given Gensler’s previous silence when asked whether Ethereum qualifies as a security—and his subsequent assertion that many tokens are indeed securities—the outlook for Ethereum ETFs remains uncertain. His stance has drawn criticism: Ripple CEO Brad Garlinghouse accused the SEC of undermining regulatory clarity, while U.S. House Financial Services Committee Chairman Patrick McHenry directly stated that Gensler misled Congress during a prior hearing regarding Ethereum’s classification.
Beyond VanEck’s filing on May 23 and the 21Shares & ARK application on May 24, BlackRock’s spot Ethereum ETF application—set for a final decision on August 17—carries perhaps the highest chance of approval. Its potential impact on market dynamics will be worth watching.
In contrast, Hong Kong appears to be ahead of the curve. On April 29, the Securities and Futures Commission (SFC) of Hong Kong approved the initial offerings of six spot cryptocurrency ETFs from China Asset Management (Hong Kong), Harvest Fund International, Bosera International, and HashKey Capital Limited. These debuted on the Hong Kong Stock Exchange on April 30—three tracking Bitcoin and three tracking Ether. HashKey Group COO Livio Weng estimates that Hong Kong’s ETF market could eventually reach 20% of the size of the U.S. ETF market, roughly $10 billion. As a new gateway for "old money" into digital assets, ETFs are expected to draw more traditional investors into the crypto space, driving overall market growth.
Growing Chances of Fed Rate Cuts
Compared to the uncertainty surrounding Ethereum ETFs, industry insiders view the Federal Reserve's interest rate policy as a clearer catalyst for reigniting the crypto bull market.
Recently, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.3% in April compared to March. A slowing CPI indicates a stabilizing economy and better-controlled inflation. As inflation comes under control, expectations for Fed rate cuts grow stronger.
Historically,加息 cycles tend to pressure crypto markets, while降息 cycles signal increased liquidity. Investors typically shift funds from low-yield bank deposits to higher-risk, higher-volatility assets—including cryptocurrencies. Looking back at the last bull run: in 2020, the Fed printed trillions of dollars to combat the pandemic, launched its fifth round of quantitative easing in March, and cut interest rates to near-decade lows within two months. Bitcoin peaked at $69,000 in November that year—an almost 18-fold increase from its bear market bottom.
Thus, we may see renewed investor interest in risk assets like crypto. Institutional players currently on the sidelines—such as pension funds—could enter the market in the second half of 2024 once favorable conditions emerge, potentially injecting hundreds of billions in capital. One bullish Bitcoin investor predicts “$6 trillion in cash waiting on the sidelines,” suggesting Bitcoin could reach $150,000 this year and asserting that the current bull market is still in its early stages.
Last week, Fed Chair Jerome Powell commented on inflation, stating the U.S. economy is performing well and expecting inflation to decline sequentially. However, Powell also noted that restrictive monetary policy may need to persist longer than expected to bring inflation down to the 2% target. “In many ways, the policy rate is restrictive. I don’t think our next move will be a rate hike; it’s more likely we’ll keep rates steady,” Powell said.
Combined with Powell’s remarks and the fact that core CPI posted its smallest year-over-year gain since early 2021, expectations for rate cuts continue to build.
Overall market sentiment is turning optimistic. Some analysts predict over an 80% chance of a 25-basis-point rate cut by the time of the September Fed meeting. Should this occur, U.S. equities could surge to new highs, the dollar index may plunge, and the crypto market is likely to rally strongly alongside stocks.
U.S. Election and Trump, the New 'Crypto Supporter'
Another major factor is the upcoming U.S. presidential election in November. The two leading candidates, Biden and Trump, hold starkly different views on cryptocurrency. This election marks the first time crypto has taken center stage in American politics.
A recent poll shows cryptocurrency has become a top issue for voters in the 2024 election. The crypto industry has intensified lobbying efforts: since 2023, crypto political action committees and industry donors have contributed $94 million to federal political committees. Coinbase and Ripple Labs alone have donated over $40 million to support pro-crypto regulatory initiatives.
Most notably, Donald Trump has undergone a dramatic shift in stance. Once calling crypto “hot air” on social media, the former president now positions himself as the first major-party nominee actively embracing Bitcoin and crypto holders.
Trump’s message is clear: support him, or face strict regulatory crackdowns under a Biden administration. Republicans are increasingly welcoming digital assets, while Democrats remain divided on legitimizing the industry. Beyond rhetoric, Trump’s personal crypto holdings have grown substantially—he now holds digital assets valued at $8,903,246.13, including 579,290 TRUMP tokens ($5.72 million), 431.018 ETH ($1.29 million), and 374.724 WETH ($1.13 million). This overt endorsement may mark a pivotal moment for the U.S. crypto industry.
Yet it remains unclear whether a President Trump would truly be friendly to crypto. He hasn’t committed to any specific crypto policies if re-elected, leading some to believe his pro-crypto stance is merely a tactic to attack Biden. While the Biden administration has been tough on the sector, under its leadership the industry has largely recovered from the 2022 crypto collapse, and spot Bitcoin ETFs were ultimately approved. So Biden may not be as bad as perceived.
Moreover, within the U.S. political system, the president’s influence may be less than assumed. The SEC operates with significant independence: its commissioners serve fixed terms unaffected by changes in administration. A new president cannot simply replace them as cabinet members. Furthermore, some crypto entrepreneurs argue that even if Biden-appointed SEC Chair Gary Gensler steps down, regulatory uncertainty and enforcement actions against crypto are unlikely to diminish.
Market speculation suggests the U.S. election may only have short-term effects on crypto. In the long run, the market’s trajectory will depend on multiple factors.
If the next president fails to reshape the broader crypto narrative, U.S. regulation will remain the biggest catalyst—whether it’s the SEC’s decision on spot Ethereum ETFs, potential White House action to repeal SAB 121, or the House vote on the FIT 21 Act. Potential stablecoin legislation, such as the Lummis-Gillibrand Payment Stablecoin Act, could also shape the market landscape. Meanwhile, given the growing likelihood of Fed rate cuts, sidelined capital will eventually seek productive outlets. Considering the strong performance of U.S. Bitcoin ETFs so far, crypto remains one of the most compelling destinations.
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