_{Brought to you by:}

Welcome to the On the Margin Newsletter, brought to you by Ben Strack and Casey Wagner. Here’s what you’ll find in today’s edition:

• How an eventful weekend impacted markets, and what it could mean for crypto.

• You’ve heard about SAB 121. But do custodians really need to do anything differently? 

• An overview of this week’s economic calendar and what we are watching.

Trump’s link to crypto markets

Last month’s presidential debate — despite shaking up election-related Polymarket odds — didn’t move crypto prices much. The June 27 event put on display an at-times-inarticulate incumbent Joe Biden and his challenger who lied consistently, Donald Trump.

But after a bullet grazed Trump’s ear during a Saturday evening rally in Pennsylvania, BTC’s price jumped upward. Not critically hurt, Trump could be in an even stronger position to win back the US presidency in November (if crypto prices are any indication.)

BTC was above $63,500 at 1:30 pm ET Monday — up nearly 14% from a week ago. The asset’s price rose roughly 5% not long after the shooting. 

CK Zheng, co-founder of crypto hedge fund ZX Squared Capital, said he indeed sees a “mild positive correlation” between the likelihood Trump is elected and BTC price. 

This GOP-BTC link — a scenario that has picked up steam in only a matter of weeks — may be undeniable at this point. Here’s a quick reminder of why that might be:

• Trump’s campaign began supporting crypto donations in May.  

• The former president met with bitcoin mining executives on June 11 in what Marathon Digital leaders called a “monumental” meeting for the industry. Trump said in a Truth Social post he wants “all the remaining bitcoin to be made in the USA.”

• Joe Biden on May 31 vetoed a resolution that sought to invalidate what many considered to be an anti-crypto staff accounting bill floated by the SEC. The House, after a July 11 vote, was not able to override that veto.

• The GOP wants to end what it calls an “unAmerican crypto crackdown,” according to platform objectives published last week.

“Asset prices seem to be viewing a Trump victory as a favorable outcome due to his policy promises around tax cuts and less regulation,” Swan Bitcoin senior analyst Sam Callahan told Blockworks. “When you couple this with the Republican Party's recent pro-bitcoin policy stance, it's easy to understand why bitcoin is reacting positively to the increased likelihood of a second Trump presidency.”

Despite Trump losing the 2020 election, his supporters playing a role in the January 2021 Capitol attack and his being convicted on 34 felony counts in May, the optimism behind him retaking the White House might have to do, in part, with what happened after the gunshots.

Secret Service officials quickly surrounded Trump. Upon getting to his feet, the former president (with blood on his face) put his fist in the air and appeared to chant “fight” before being taken off stage.  

Elon Musk said in a Saturday X post: “Last time America had a candidate this tough was Theodore Roosevelt.” The Tesla CEO also re-upped a Trump-related post by Craft Ventures co-founder David Sacks that began with, “I know a hero when I see one.”

Though Zheng acknowledged the connection between Trump’s odds to win and bitcoin’s price, he argued the US election is not a key long-term BTC market driver.

“We believe the bitcoin market will be driven predominantly by the US debt burdens, the Fed interest rate policy, and the geopolitical uncertainty around the globe,” he said. “The Bitcoin halving process and the seasonality may also create short-term volatilities, which will be particularly bullish for bitcoin in Q4.”

As for more possible political price catalysts, Trump reportedly still plans to speak at the Bitcoin Conference in Nashville.

“If Trump speaks about [bitcoin's] potential as a treasury reserve asset, this could be a milestone moment for bitcoin adoption in the US,” Callahan said.

There’s no doubt the industry will be watching.

— Ben Strack

The percentage of bitcoin supply currently held by US spot BTC funds, according to Fineqia International analyst Matteo Greco’s Monday research note. 

Assets under management within the category, he added, amounted to more than $51 billion worth of BTC at the end of last week. The 10 funds in the category saw $1 billion of net inflows from June 8 to June 12 — bringing the total to $15.8 billion since they launched in January.

Applications for student tickets are open! For only $99 you can access:

• Three-day full event pass

• Pre-event networking app

• Permissionless-hosted after-parties

This application is open for students currently enrolled in college or university. Applications will be reviewed on a rolling basis.

You may remember our past coverage of SEC staff accounting bulletin (SAB) 121 — the securities regulator’s controversial accounting guidance for crypto custodians — and the bipartisan effort in Congress to overturn the practice, which was ultimately unsuccessful. 

SEC Chair Gary Gensler himself seemed confused by the debate ignited by SAB 121.  

“It’s just a staff accounting bulletin,” he said during a December 2023 panel appearance. 

SABs represent, as their name suggests, the opinions of SEC staff. They are not rules and they do not establish standards for businesses to follow. 

Where the situation got sticky though, was in October 2023, when the Government Accountability Office released a report that deemed SAB 121 a rule under the Congressional Review Act. 

This classification is what enabled Congressional leaders to write Joint Resolution 109 (the bill that attempted to overturn SAB 121) in the first place. 

Even though the GAO says SAB 121 is a “rule,” the SEC does not think of it this way, the agency said in a December 2023 statement. It is still just guidance from the staff designed to reflect how the agency views crypto custody practices, but it is not enforceable. 

So it was not shocking to discover, as Bloomberg Law reported, that “several large banks” in 2023 consulted with the SEC and were told they did not actually have to follow SAB 121. The bill suggests that crypto custodians list custodied assets on their balance sheets as liabilities.

In exchange, banks agreed to additional safeguarding steps to protect against risks associated with crypto, according to Bloomberg. 

We are certainly not advising custodians to go against SAB 121 in any way, but after the guidance stirred up a storm in Congress, we’re curious to see how, and if ever, it actually comes to fruition.

— Casey Wagner

Welcome back to another Monday edition of On the Margin! We have a relatively quiet week ahead in terms of the economic calendar, with no major monthly reports (labor, inflation, etc.) due this week. The countdown is on to the next FOMC meeting, though, so you’ll want to keep an eye on the data we do receive in coming days. 

• On Tuesday we get June’s retail sales report. After May’s data came in below expectations (sales grew by 0.1% versus the anticipated 0.3%), a solid report is important this week. If consumers are pulling back, the odds of a soft landing may unfortunately decrease. 

• The latest Fed Beige Book is due Wednesday afternoon. The report, published eight times a year, gives us a look into how economists, bankers and business owners are thinking about current economic conditions. If you’re seeking hints about the schedule for rate cuts, check that. 

• Also from the central bank: On Thursday, the Philadelphia Fed drops its manufacturing survey. Economists are calling for a big increase after June’s figure dropped to 1.3 from the previous monthly reading of 4.5. Analysts expect July’s figure to come in at 2.9, which would be a solid indicator of sustained economic growth, especially as one of the first data points to be published for the current month.

— Casey Wagner

• Fed Chair Jerome Powell spoke at the Economic Club in Washington DC earlier this afternoon. As expected, the central bank chief was tight-lipped about the future of interest rates. “Our whole success depends on the public’s confidence that we are ethical,” he said when asked about his extreme “anti-leak” stance. 

• All eyes are on Milwaukee today as the RNC kicks off. Former President Trump said Monday he will announce his VP pick today. On the short list are Sens. Marco Rubio of Florida and JD Vance of Ohio, North Dakota Gov. Doug Burgum and Virginia Gov. Glenn Youngkin, all of whom are reportedly on-site at the convention. 

• The SEC still had not given final approval for proposed US spot ether ETFs to launch, as of writing this newsletter. A number of industry watchers expect the decision to come this week. Keep an eye on Blockworks.co for updates.

• Stand With Crypto, Coinbase’s policy-focused nonprofit, has launched in Canada, the company announced Monday. They must think our Northern neighbors want some help finding crypto-friendly politicians, eh?