Ceasefire Drives Crypto Rally Amid U.S. Regulatory Wins

Firi Weekly: Ceasefire Drives Crypto Rally Amid U.S. Regulatory Wins

  • Peace Returns to Markets:
    • Iran's measured response to U.S. strikes and subsequent ceasefire drove Bitcoin up 5.8% and Ethereum 7.9% in 24 hours as geopolitical tensions eased.
  • Solana ETF Breakthrough:
    • The first U.S. staked ETF approaches launch, potentially marking the SEC’s acceptance of staking rewards and opening doors for enhanced Ethereum ETFs.
  • Crypto Becomes Mortgage Asset:
    • U.S. Fannie Mae and Freddie Mac prepare to accept cryptocurrency holdings for home loan applications, signaling major mainstream financial integration.
  • Stablecoin Supply Surges:
    • Total stablecoin market expanded 24% ($48.85 billion) in six months despite recent criticism from the Bank for International Settlements (BIS).

Last Week’s Big Three

Ceasefire in the Middle East: Last week, we highlighted Iran's potential response to U.S. strikes on Iranian nuclear facilities as a critical market catalyst. On Monday evening, Iran fired missiles at a U.S. military base in Qatar—a constrained retaliation that avoided escalation. President Trump even thanked Iran for providing advance notice of the attack.

Hours later, the U.S. announced a ceasefire between Israel and Iran. While both countries allegedly violated the agreement shortly after implementation, they have denied these claims, and the ceasefire now appears to be holding.

As expected, markets rallied on both Iran's restrained response and the swift ceasefire announcement. Bitcoin surged 5.8% between Monday 17:00 and Tuesday 17:00, while Ethereum jumped 7.9% over the same period.

U.S. Solana ETFs Draw Closer: Friday brought significant developments when the SEC confirmed it had no further comments on REX Shares’ Solana ETF. Yesterday, REX Shares confirmed that the ETF will start trading on Wednesday, instantly sending the Solana price higher.

This REX Shares product differs substantially from the recently launched Bitcoin and Ethereum spot ETFs. Its rare C‑corp business structure initially prompted SEC concerns about meeting investment company legal definitions, but the agency now appears satisfied with the structure.

The breakthrough is not just about it being the first U.S. Solana ETF; it is also about the staking component. REX Shares will stake Solana and distribute rewards to holders, making this the first staked U.S. crypto ETF. This precedent could unlock staking for Ethereum ETFs, where multiple issuers have requested permission to stake underlying assets to enhance investor appeal.

Nine additional issuers have filed for U.S. Solana ETFs using the traditional structure of Bitcoin and Ethereum ETFs, including Wednesday’s filing by Invesco and Galaxy Digital. The SEC must approve or deny these applications by October 10. We believe it is more likely than not that Ethereum ETFs will gain staking capabilities this year, alongside Solana ETF approvals.

A Home for Crypto: The U.S. regulatory landscape shifted further when Bill Pulte, director of the Federal Housing Finance Agency (FHFA), which oversees government mortgage enterprises, directed Fannie Mae and Freddie Mac to prepare for accepting cryptocurrency holdings as mortgage assets. This means future homebuyers would not need to liquidate crypto positions when applying for loans.

This integration into the financial system’s core infrastructure could reduce selling pressure over time. However, it also introduces systemic risk by effectively making volatile crypto assets collateral in the housing market—a fundamental economic pillar. The specific risk assessment methodologies Fannie Mae and Freddie Mac develop will determine whether crypto volatility could ultimately force homeowners to sell properties in extreme scenarios.

Behind the Charts

Chart 1: Daily Bitcoin Exchange Netflow

Bitcoin exchange flows have overall reversed course, turning negative after last weekend’s positive readings. This indicates net outflows from exchanges—a bullish signal suggesting long-term accumulation rather than near-term selling pressure.

Chart 2: Bitcoin Apparent Demand (30-Day Sum)

On the other hand, Bitcoin’s apparent demand metric has recently turned negative. This measure compares daily mining issuance against changes in bitcoins unmoved for over a year. Negative readings suggest potential selling exceeds new demand—a bearish indicator worth monitoring.

Chart 3: Total Stablecoin Supply

Following last week’s discussion of the U.S. GENIUS Act (proposed stablecoin regulation), the stablecoin market posted another strong week with $1.93 billion in growth. Year-to-date expansion now totals $48.85 billion, representing 24% growth in six months.

A Number to Remember

3

Last week, the BIS published a report claiming stablecoins fail all three requirements for effective money: singleness (consistent parity to traditional currencies), integrity (protection against financial crime), and elasticity (ability to expand/contract liquidity dynamically). We disagree—current regulatory frameworks ensure stablecoins maintain at least singleness and integrity by being stable and transparent while meeting anti-money laundering requirements.

On Our Radar

On our radar for the week ahead:

  • Trump’s Big Beautiful Bill: The controversial Republican package extending 2017 tax cuts while boosting defense spending and cutting social programs faces a critical Senate vote this week. The bill’s projected multi-trillion-dollar deficit impact and healthcare coverage reductions make amendments likely, potentially moving markets.
  • The Situation In the Middle East: While the Israel–Iran ceasefire holds for now, we are monitoring closely. Any breakdown could reignite geopolitical risk premiums across asset classes.
  • What Happens in Ethereum Land: EthCC, Ethereum’s premier technology conference, kicked off yesterday in Cannes. We are particularly watching for institutional partnership announcements and progress on scaling solutions.
Mads Eberhardt01/07/2025