Earnings Eurphoria

Macro

Equities extended their run. Nasdaq +4.5%, S&P +2.3%, both at fresh all-time highs. The rally broadened with small caps making new highs alongside mega-cap tech. Nonfarm payrolls beat at 115k vs 65k consensus, unemployment steady at 4.3%. Labor market holding.

The Hormuz situation was volatile but markets treated it as noise. Project Freedom launched Monday, the U.S. opened a lane and sunk six Iranian boats. Only two ships actually made it through. Trump paused the operation Tuesday to make room for negotiations, while the blockade of Iranian ports remained. Iran struck UAE energy infrastructure, cargo vessels were hit in the strait, and Brent swung between $88 and $113 on the week. Through all of it, equities barely blinked.

The war premium that defined Q1 has substantially unwound even as the conflict continues. This is either a rational repricing driven by AI earnings momentum and a resilient labor market, or it's complacency that gets punished on the next escalation. Iran's counter-proposal landed Sunday demanding sovereignty over the strait, compensation, and sanctions relief. Trump called it "totally unacceptable." Oil is up 3% into Monday's open.

This week: CPI Tuesday gives the first full read on energy passthrough into inflation. Powell's chairmanship ends Thursday, Warsh confirmation expected. His first dot plot at the June FOMC is shaping up to be the most consequential Fed meeting of the year.

Digital Assets: Breakout

BTC broke through $80k, reaching ~$83k before settling around $82k. First time above this level since January and a clean break of the 200-day MA that has been the ceiling for seven months. This is the signal we've been waiting for. But the way it got here tells you to be cautious rather than euphoric. The move was built on a $10B jump in open interest and the lowest spot volumes in two years, which is the exact opposite of what a healthy breakout looks like.

Open interest jumped from $48B to $58B in a month. Bull markets get confirmed by spot. This one is being driven by perps. BTC ground above $70k, nobody believed it, shorts piled in, got liquidated, and had to be covered by buying. Funding is still predominantly short so there's more squeeze to come. But covering isn't conviction.

The longer-term picture is more constructive. ETF flows added $623M, Morgan Stanley's new BTC ETF pulled in $194M in month one without a single day of outflows. Exchange reserves are still at 7-year lows. The accumulation story is intact. It's the short-term driver that's suspect, and when the squeeze runs its course, spot needs to step in or this retraces.

RSI is entering overbought. Grinding toward $85k is possible but the risk-reward of chasing here isn't great. If the squeeze resolves and spot doesn't show up, it gets thin underneath pretty quickly.

On alts, the shift from everything-moves-together to individual names getting bid continues. Tokenization is picking up real institutional interest with Centrifuge leading. AI compute tokens also caught a bid, Venice Token up on platform usage and deflationary supply mechanics. Narratives are back but they're more specific than before.

Our take:

“We should get confirmation of what kind of rally this is really soon"

The break above the 200-day MA is significant. First since October, removes the technical ceiling that defined this bear market. But it happened on leverage and short covering with declining spot volumes. Previous cycle bottoms were confirmed by organic spot pickup. We haven't seen that yet.

The institutional bid remains the strongest argument. ETF flows, exchange reserve drawdowns, whale accumulation all point to long-term holders absorbing supply. But that bid is net reducing in magnitude at higher levels.

Equities are carrying crypto right now. If CPI comes in hot and the Warsh transition introduces uncertainty, the equity bid could stall. BTC holding above $80k through a macro shock would be the confirmation. Selling off in lockstep would tell you the squeeze was the true driver, not any form of regime change.

The structure in which the market continuously squeezes seems to get resolved slowly however if it returns, it could easily push the market higher. And while this could be the case in the shorter term, a more medium term view would probably call for a breather in the market as RSI feels stretched in the face of declining spot market activity in increasing leverage/speculation.