Stablecoin spirit

In the wake of the Senate's passage of stablecoin legislation, Circle and Coinbase partied like it was 1999 — and they were dot com stocks — with each rallying by double digits on hopes of crypto exploding into the mainstream.

During the early afternoon, CIRCLE reached $180, marking a fresh all-time high for the stock. Then it went higher, closing the session just south of $200, up 33% on the day. Shares of COIN, meanwhile, surged 16% to $295.

Circle is the issuer of USD-pegged USDC, the industry's second-largest stablecoin behind Tether's USDT. The latter has a market cap near $155B while USDC is more in the neighborhood of one-third of that size. However, Coinbase is aligned with USDC, the stablecoin of the exchange's realm and a boon for its bottom line — as Coinbase shares in revenues derived from the interest earned on USDC's reserves backing the USDC in circulation.

For its part, Coinbase in Q1 notched $217M in earnings from the revenue-sharing arrangement, up from $197M in Q1 of 2024.

Fed Chair Jerome Powell on Wednesday just before 3 p.m. (EST) delivered a crisp, unambiguous message to the markets: expect some inflation coming soon.

Some stocks momentarily sold off, sort of. But then, ultimately, the market shrugged its shoulders. By 3:30 p.m. (EST), the Dow and S&P 500 were each trading in a choppy, sideways mode. The latter blue-chip index seems to enjoy sitting a few points shy of the 6,000 mark. Budge much higher it would not. As of Wednesday's close, the S&P for the day had notched a slight (0.03%) loss.

Bitcoin, which can't decide if it is a risk asset or an inflation hedge, spent Wednesday holding steadily at about $104K, which is 4% lower than it was one week ago. BTC is down 7% from the all-time high of, per CoinGecko, $111,814 hit on May 22.

“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs,” Powell said during a press conference yesterday after the conclusion of the Fed's June meeting which saw interest rates remain unchanged.

Meanwhile, the Israel-Iran conflict has created an added overlay of cloud cover atop a thick bank of trade-war-related fog. As far as the U.S. getting involved, President Trump as of last night had not made up his mind.

Despite the witch's brew that could lead to lower growth and higher prices — particularly so at gas pumps if the war in the Middle East widens — the Fed still set expectations for the possibility of two rate cuts this year.

"This is only the first step," said U.S. Senator Cynthia Lummis, a Republican from Wyoming, after the Senate passed the "Guiding and Establishing National Innovation for U.S. Stablecoins Act," or "GENIUS Act," on Tuesday. A landmark piece of crypto legislation — that still needs to be passed by the House of Representatives — the GENIUS Act formally creates a federal framework for regulating stablecoins, a form of crypto typically pegged to the U.S. dollar.

Because stablecoins allow users to easily enter and exit crypto positions without accessing dollars directly, they are "a key ramp" between the crypto ecosystem and traditional financial markets, as Decrypt explained.

"It’s widely expected that once stablecoin legislation is signed into law, the floodgates from Wall Street and the American banking sector will open, potentially bringing trillions of dollars into the crypto market," Decrypt said.

Lummis was an early and vociferous advocate of crypto well before industry lobbyist dollars deluged Washington, D.C.

But it was Senator Kirsten Gillibrand, a Democrat from New York and among the bill's co-authors, who helped garner support from her fellow Democrats, several of whom had voiced concerns about perceived conflicts surrounding President Trump's crypto ventures. The ever-widening list of activities includes a stablecoin, USD1, issued by World Liberty Financial, the Trump family crypto platform.

Lummis is correct about the passage of the GENIUS Act only representing a first step, as the House might not move to even vote on the legislation, at least not immediately.

The coming weeks could see something of a standoff between Senate and House Republicans, who have competing incentives about which crypto bills to pass, and when, Decrypt said. Senate Republicans want to see GENIUS passed by July 4.

But House Republicans have their own stablecoin bill. And they may want to combine it with the more broadly impactful crypto market structure bill. "That could give the combined legislation higher odds of passage through both chambers," Decrypt added.