ETFS Multi-Asset Weekly – Mixed Jobs Report Keep Investors Guessing
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Highlights
• Commodities: Persistent surplus weighs on oil prices. • Equities: Global equity market sell off continues amid weaker PMI and US payrolls data. • Currencies: Dollar stages a comeback after August jobs report
The European Central Bank revised downwards its growth and inflation forecasts, paving the way for further policy stimulus. The Chinese authorities followed suit, revising their growth expectations down to 7.3% this year from 7.4% earlier. The US Federal Reserve is likely to maintain caution in this environment and hold off raising rates in September despite falling unemployment. A number of central banks meetings this week (Bank of England, Bank of Canada, Reserve Bank of Canada), will shed light on how other policy makers have interpreted the recent volatility.
Commodities
Persistent surplus weighs on oil prices. Oil capped its biggest three day rally in 25 years after the weekly build up in US crude oil stocks rose by 4.7mn barrels. Saudi Arabia reasserted its stance to maintain market share by lowering its official selling prices for October. President Obama clinched sufficient votes in the US Senate to secure the Iranian nuclear deal reinstating the oversupply in oil market. Gold lost its lustre on the back of a strengthening US dollar. Sugar prices were positively impacted by fears of heavy rainfall impacting the Brazilian sugar cane harvest and a sharp rise in Thai sugar exports to China. The negative impact of the stronger US dollar on US exports coupled with ample EU wheat supply extended wheat’s downward trajectory. China’s downward revision of GDP forecasts is likely to can the cap the industrial metal price rally seen last week.
Equities
Global equity market sell off continues amid weaker PMI and US payrolls data. France’s purchasing manufacturers index (PMI) data shrank more than expected while stronger German PMI data helped drive a rebound in the DAX in the second half of the week. UK Services grew at the weakest pace in more than two years in August, weighing on the FTSE 100. A mixed labour market report, showing below-expectations payrolls but a surprising fall in unemployment, helped maintain equity market volatility. Implied S&P volatility (VIX) rose to 27.1 (up 4%), while small-cap equities (Russell 2000) fell 0.7%. Chinese equities responded positively to the interest rate cuts from the prior week, but continued intervention from the government casts doubts as to whether the gains are sustainable.
Currencies
US Dollar stages a comeback after August jobs report. Currencies from commodity exporting nations bore the brunt of the dollar’s gains. While the gain in US jobs were weaker-than-expected, the highest average hourly earnings since March and the lowest jobless rate since April 2008 (considered to be full employment by the Federal Reserve) raised the appeal of dollar denominated holdings. The euro retreated on the back of an increasing likelihood of further easing after the ECB meeting. Sweden’s krona climbed to a six week high versus the euro after the Riksbank kept its repo rate unchanged at 0.35 percent confirming the current stimulus is helping steer the economy out of a deflationary trap. Disappointing second quarter GDP growth and an unexpected decline in retail sales caused the Australian dollar to hit six year lows this week.
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Last week was monumental for Bitcoin and the broader crypto ecosystem, ushering in key regulatory and legislative developments in the US. These changes not only underscore a shifting attitude toward digital assets in the US but also lay the groundwork for greater clarity and legitimacy for crypto globally in the years to come. Following are the five reasons we think last week was such a defining moment for crypto assets and why we think the current environment is setting this asset class up for a remarkable 2025.
A paradigm shift at the SEC
One of the most significant signals of change came from US Securities and Exchange Commission (SEC) Acting Chair Mark Uyeda, who announced the establishment of a Crypto Task Force led by Commissioner Hester Peirce, affectionately known as ”Crypto Mom” for her engagement in the digital asset space while at the SEC. The task force, along with the favorable views on digital assets from incoming chair Paul Atkins, reflects an important step toward ending the contentious practice of ”regulation by enforcement,” which has long stymied innovation for crypto entrepreneurs and limited opportunity for US investors.
The SEC’s subsequent decision to rescind Staff Accounting Bulletin (SAB) 121, which imposed restrictive accounting guidelines on banks wishing to custody crypto, further underscores the regulatory shift. Its repeal not only provides operational relief but also signals a more pragmatic approach to crypto oversight.
These regulatory moves reflect a broader recognition by US authorities of the need for a framework that fosters innovation while ensuring investor protection. They set the stage for a future where digital assets are more seamlessly integrated into the financial system.
New congressional leadership
Another pivotal development was the appointment of Senator Cynthia Lummis as chair of the newly created Subcommittee on Digital Assets. Lummis, a long-time advocate for Bitcoin and blockchain technology, is uniquely positioned to champion legislation that promotes innovation while addressing key concerns around market integrity and consumer protection.
Her leadership comes at a critical time, as Congress considers landmark legislation such as the Stablecoin Act and the Bitcoin Act. The Stablecoin Act, which could see approval this year, aims to establish clear guidelines for stablecoin issuance and use. Meanwhile, the Bitcoin Act proposes an audacious goal: for the US government to accumulate 5% of bitcoin’s total supply. There are obstacles to this proposal, some of which I noted in August last year, but if enacted, this legislation could significantly impact Bitcoin’s global adoption and price trajectory.
A game-changing executive order
The White House also contributed to the week’s momentum with a new executive order aimed at shaping the future of digital assets in the US. A key aspect of this order is its rejection of a Central Bank Digital Currency (CBDC) in favor of fostering stablecoin development. President Trump has been vocal about his preference for implementing a ”digital dollar” on top of open blockchain networks, a move that aligns with crypto’s decentralized ethos.
This executive order also signals the end of ”Operation Chokepoint,” an informal campaign that had effectively debanked parts of the crypto industry. By reaffirming the importance of open networks and stablecoins, the administration is providing a clear direction for the role digital assets could play in the US financial system.
Perhaps the most intriguing development is the proposal to establish a government stockpile of digital assets. While the term “stockpile” has been carefully chosen over “reserve” to avoid direct comparisons with traditional currency reserves, the implications are nonetheless profound. The working group tasked with studying this proposal has expanded its scope beyond bitcoin to include crypto assets more broadly.
While it’s too early to predict how or whether the stockpile will be established, the study represents a thoughtful approach to a high-stakes decision. It could mark the beginning of a global trend, with other nations potentially racing to stockpile crypto assets as part of their sovereign holdings, which we’ve already seen this week with the Czech central bank.
Steps toward a comprehensive regulatory framework
The week’s developments also highlight the ongoing evolution of regulatory characterization. US regulators are moving toward a more nuanced understanding of digital assets, which is essential for crafting effective policies. This trend was echoed in the revocation of SAB 121 and the growing momentum behind legislation like the Stablecoin Act. Additionally, the broader regulatory framework for market structure in digital assets, which could happen this year or next, will likely address issues ranging from trading practices to asset classification. These steps indicate a deliberate effort to integrate crypto into the financial system with precision and clarity.
The start of a geopolitical race to embrace crypto
These developments, particularly the possibility of a US crypto stockpile, also raises the stakes on the global stage. Sovereign states accumulating crypto assets could lead to a new form of economic competition, where digital assets play a central role in national strategy.
The US government’s interest in studying this proposal reflects an understanding of crypto’s growing significance in global finance. It also aligns with the nation’s broader goals of maintaining technological and economic leadership.
What’s next?
The developments of the past week are part of a broader trend of increasing institutional and governmental recognition of crypto’s potential. However, several key milestones remain on the horizon:
• Stablecoin Act Approval: This legislation, which could happen before the fourth quarter this year, will provide much-needed clarity for stablecoin issuers and users.
• Market Structure Framework: Expected by 2026, this framework will define the rules of engagement for trading and investing in digital assets.
• Bitcoin Act Progress: If the US government begins accumulating bitcoin, it could have profound implications for the asset’s supply dynamics and global adoption.
• Stockpile Study Results: The findings of the crypto stockpile working group could shape the long-term digital asset strategy in the US.
As these milestones approach, bitcoin and other crypto assets are likely to experience heightened volatility, but also greater legitimacy. Investors, policymakers, and innovators will continue to pay attention to these developments, as they could define the future of the global economy. While challenges remain, the direction is clear: crypto is moving from the fringes of finance to center stage. As these changes unfold, the crypto ecosystem is poised to evolve into a more robust and integral part of the global economy, presenting investors with attractive opportunities to get broad exposure to this emerging asset class.