Holding the line

Macro

Last week, the fragile post-war calm broke down. With US-Iran talks paused for Khamenei's funeral observances, Iran fired on commercial vessels in the Strait of Hormuz, the US responded with airstrikes, and by the weekend a third round of US strikes had hit as Tehran declared the Strait closed "until further notice."As a result, oil spiked midweek and the 10Y hit 4.57% on Wednesday, before Friday eased on rumours of renewed contact. Into Monday, crude is gapping toward $79 as the weekend escalation gets priced: a third round of US strikes and Tehran declaring the Strait closed "until further notice." Through Friday, equities read the ceasefire as tenuous but not war, with the S&P up ~1.4% for a fourth straight green week and the Nasdaq up ~1.8%. Brent finished up 6.3%, top of the board.

For the Fed, the soft June payrolls (57k) had cut September hike odds to ~50%, but the oil spike pushed these odds back to ~61%. Supply has largely normalised, with Saudi exports near 90% of pre-war levels, but the shipping attacks put the risk premium back and the weekend closure keeps it there. This week's CPI feeds directly into the July 28-29 FOMC. It's the first print to capture the full oil round trip, so a cool headline unwinds some of that 61%, a hot one locks it in.

Digital Assets

Crypto did something this week it couldn't have done in March, it took repeated live geopolitical shocks and held. Through three rounds of US strikes and a declared Hormuz closure, BTC dipped but the $62k levels, defended since last month's lows held, and BTC spent the week grinding back toward $64k, closing up ~0.3% on your desk's Fri-Fri mark and up around 2% intraweek. ETH outperformed at +1.3% near $1,805. With oil, stocks and bonds shut for the weekend, BTC was one of the only assets pricing the escalation in real time and it barely moved, which is an indication that many of the weaker hands have left the market already, a promising sign as we continue to identify the bottom of this bear market.

After roughly $8-9B of outflows since May, the flow finally turned. The BTC and ETH complex pulled in ~$282M on the week, breaking an eight-week streak. It's one data point, not a reversal, and there was still a red day in the mix. Paired with the whale accumulation of recent weeks, it reads like the marginal seller is finally running out as also suspected by BTC holding up in the face of geopolitical tension. The next crypto specific catalyst is the CLARITY Act, now slated for floor action this month after the July 4 target slipped.

On Strategy, the framework we covered before produced its first real action. Strategy sold 3,588 BTC for ~$216M, its largest sale since abandoning the never-sell policy, to fund preferred dividends. The tell is the market's reaction, which was a shrug. Two months ago a 32 BTC sale sparked a selloff. A 3,588 BTC sale now barely registers, which says the forced-seller fear that drove June has been replaced by an understanding that this is just the monetization framework working as designed.

Our take:

“A higher low through a live shock"

BTC put in a higher low through actual US airstrikes on Iran, the $62k shelf held, and the eight-week ETF outflow streak finally broke. Those are the two things we said needed to happen. (i) the deleveraged base has to wear bad news without cascading, and (ii) the flows have to turn. Both showed up. The Strategy sale barely denting the tape is a third quiet positive, since it clears the overhang that dominated June.

That said, now we need to wait to see if this all holds. One good flow week off the worst month on record is a turn, not a trend, and it needs consecutive positive sessions to confirm. The macro still has an impact with oil gapping up into Monday, September hike odds at 61%, and the whole thing hinging on a CPI that could break either way. Options markets say the same, puts still bid over calls, traders paying for near-term event protection rather than chasing upside.

So this is a market that has stopped going down (for now) but hasn’t started recovering yet. The catalysts are Tuesday's CPI, whether ETF inflows string together consecutive sessions for the first time since May, and the Hormuz tape into Monday's oil open. Cool CPI plus flow follow-through plus CLARITY progress is the path that turns the higher low into a recovery, with $67,250 the level that confirms it. A hot CPI and a sustained Hormuz closure put $62k, then $60k, back in play. For now, crypto is finally trading on its own improving internals rather than just wearing the macro, and after the last two months that itself is the story.