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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:

• Breaking down what to expect (and listen for) when Coinbase reports its Q2 earnings tomorrow.
• FOMC members have spoken. Here’s what they said, and what it means for interest rates.
• We’re just over 100 days since the Bitcoin halving. History suggests something starts to happen around now.

What to expect from Coinbase’s Q2 results

It’s no secret Coinbase is expected to report lower trading volumes (and overall revenue) in Q2.

Still, analysts note the bull case for the “underappreciated” crypto stock remains in place — particularly with the upcoming election.

Oppenheimer analysts Owen Lau and Guru Sidaarth anticipate Coinbase revenue to drop from $1.6 billion in Q1 to $1.36 billion in Q2. The culprit? Relatively stable bitcoin prices, they said, which drove down trading volumes by an estimated 31% quarter over quarter.

“It appears that the halving effect was priced in before the actual event and countered by outflows in spot bitcoin ETFs,” Lau and Sidaarth wrote in a July 21 research note. “Some of the volume was pulled forward to March, which had an exceptional month.”

On the other hand, the analysts predict higher stablecoin and blockchain revenue, noting the average market cap of USDC “showed signs of sustained recovery.”

Beyond the numbers, Morningstar equity analyst Michael Miller said he’ll be listening for executive commentary about the growth of Coinbase’s international business.

Though the Coinbase International Exchange reached $76 billion in notional volume traded during the first quarter, its lower fees bring into question its long-term revenue potential, Miller noted.

Another area to watch? The evolution (and monetization) of Base, Coinbase’s L2.

Base’s developer activity increased by eight times from the fourth quarter of 2023 to the first three months of this year, Coinbase said in its May 2 shareholder letter.

Bitwise’s Alyssa Choo previously said Coinbase’s ability to cross-sell products is its “superpower” — noting that Base should become a key contributor to long-term revenues.

That said, Oppenheimer analysts warned investors about overhyping that business line. They estimate that Base generated revenue of $20 million during the second quarter, down from $32 million during the previous three months.

As we zoom in on Coinbase’s anticipated Q2 metrics, investors are also encouraged to zoom out.

Coinbase’s stock price was roughly $230.60 at 2 pm ET Wednesday — up 47% year-to-date but down about 1% over the last month.

COIN shares are positioned to see a boost if Trump is elected in November, Lau and Sidaarth argued. After all, the former president’s recent promise to “keep 100% of all bitcoin the US government currently holds or acquires” offers a glimpse into a future of potentially lower regulatory friction.

The Oppenheimer analysts added: “With increasing regulatory clarity, adoption and potential S&P 500 inclusion, we believe Coinbase’s long-term thesis is highly underappreciated, given the massive attention on current volume and regulations.”

— Ben Strack

$163.7 billion

This value represents the market capitalization of asset-backed stablecoins, which, according to a new study from the Bank of International Settlements and the Bank of England, can be supervised through balance sheet monitoring.

The study, dubbed “Project Pyxtrial,” created a prototype data analytics platform that can provide “near real-time” data about stablecoins’ liabilities, assets and reserves.

“The technology is a first step towards a tool that could support supervisors and regulators in proactively detecting issues in stablecoin backing and aid the development of policy frameworks based on integrated data,” the Wednesday report states.

It’s Fed day!

FOMC members, unsurprisingly, opted to hold interest rates this afternoon. Markets trended higher throughout the trading session, with the S&P 500 and Nasdaq Composite indexes gaining 1.5% and 2.3%, respectively.

In the crypto world, bitcoin and ether also stayed solidly in the green. BTC was up 1.3% from 24 hours ago, as of 2 pm ET, while ETH gained 0.8% over that span.

The real point of interest from this latest FOMC statement came in the third paragraph:

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward [2%].”

If you remember, back in June, such “forward guidance” read like this:

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward .”

That’s right. It was exactly the same.

Not exactly encouraging news for those banking on a September rate cut, but we still have more economic data to consider. Earlier in the statement, committee members note “there has been some further progress” on the inflation front and that “job gains have moderated.”

It’s not just Fed day; it’s also jobs week. The latter data will be telling as we speculate about what central bankers will do come September.

We got the JOLTS report yesterday, showing job openings inched lower in June. The report also noted there are 8.18 million vacancies — fewer than in May, but still higher than expected.

Pressure on the labor market bodes well for interest rate cuts, but we still have more figures incoming: initial jobless claims on Thursday and the July employment report on Friday.

Friday’s report is really the one to watch, as it will give us the best indicator of whether or not interest rate cuts are coming in September. Beyond that, though, it will serve to highlight the Fed’s current dilemma: Is economic growth or interest rate cuts more important?

A “bad” labor report is “good” for markets, since it all but guarantees a rate cut, but when will bad data just be bad? Hopefully not on Friday.

— Casey Wagner

100-plus days post-halving, here’s what could be next

Previous cycles have shown bitcoin’s more significant price moves upward start to come 100 days after the halving. It has been 103 days since mining rewards dropped from 6.25 BTC to 3.125 BTC on April 19, so let’s check in.

Data shows that so-called T-value — a measure of statistical significance — becomes bigger and gradually increases at that 100-day mark, according to ETC research head Andre Dragosch.

“This means that the performance difference between pre- and post-halving becomes so large that it is unlikely to be pure coincidence,” he told Blockworks.

There was, of course, an unprecedented pre-halving rally, during which BTC in March reached an all-time high (above $73,000). That came after US spot bitcoin ETFs hit the market in January.

Thus, BTC overshot the “fair” price (based on scarcity alone) following those launches, Dragosch said.

“That decoupling has now resolved itself again with the current consolidation, and we now think that the halving should provide an increasing tailwind…until year-end and beyond,” he added.

BTC’s price was roughly $66,600 at 2 pm ET Wednesday — up about 1% from a week ago.

Typically, the highest performance difference between pre- and post-halving periods comes around 400 days after the event, Dragosch noted — meaning May 2025 or so, in this case.

ETC Group estimates an “equilibrium price” of $103,000 by the end of the year, Dragosch said. He believes the asset could reach $172,000 by the end of 2025.

Outside the halving effect, continued crypto adoption and potential regulatory developments in an election year could spur big BTC price action. There’s plenty to keep an eye on.

— Ben Strack

Bulletin Board

• As sanctions against Russian entities persist, the lower house of the Russian Parliament on Tuesday gave businesses the go-ahead to use cryptocurrencies for cross-border trades, according to local media reports.
• Grayscale Investments launched its Bitcoin Mini Trust on Wednesday. With a fee of 0.15% (and an apropos BTC ticker), the newest US spot bitcoin offering is the category’s cheapest. Keep an eye on Blockworks.co for coverage of the launch.
• Bitcoin’s correlation to US equities dipped into the negative this week, marking a sharp turnaround from mid-June when stocks and BTC were trading almost in tandem. Correlation coefficients between bitcoin and the S&P 500 and Nasdaq Composite indexes on Wednesday sat at -0.4 and -0.6, respectively.