Decoupling

Macro

Last week's setup inverted. Brent dropped 9% on improving Iran rhetoric, the 10Y came back to 4.50%, and equities ripped to fresh ATHs. The energy-driven inflation pulse lost some bite.

What didn't reverse was the consumer. Michigan sentiment hit a record low of 44.8, year-ahead inflation expectations at 4.8%. The Iran shock has been long enough to embed in household expectations. That's the slow-burn problem the Fed cares about more than a single CPI print.

May flash PMI showed manufacturing at a 4-year high with input costs at their highest since late 2022. Goods inflation reaccelerating. April FOMC minutes flagged that further firming could be appropriate if inflation stays sticky. The dovish Warsh pivot isn't pricing yet.

Nvidia was the headline. Q1 revenue $81.6B (+85% YoY), Q2 guide $91B, Data Center +92% YoY, $80B buyback and 25x dividend. Q2 guide assumes zero China data center compute, so underlying demand is even stronger. Huang called it "parabolic."

The more interesting bit was the reaction. After-hours barely moved. AI is priced for perfection and incremental beats no longer shift the tape. The read-across for the rest of the market, crypto included, is to watch for signs of AI exhaustion. If that momentum fades, the deteriorating macro picture gets a lot more weight.

Digital Assets: Lagging

The divergence is the story. S&P at ATHs on its 8th green week. BTC at ~$76,600 (-1.5%), ETH at ~$2,140 (-1.7%). Crypto sat out a tape that should have helped.

BTC spot ETFs lost another ~$1.26B, second consecutive week of redemptions, over $2B out in 14 days. ETH ETFs lost another $216M. The institutional bid that took BTC from $70k to $80k in April has stepped back.

The marginal risk dollar went into equities, not crypto. When AI semis are working and yields are easing, crypto should follow. It didn't. Based on our OTC flow, we see that institutional buying pressure, which was responsible for the recent +ve price action, is now fading quickly, indicating that institutional investors might be at capacity or are re-assesing risk/reward at these new levels.

ETH continues to show weakness with ETH/BTC keeps grinding lower, at a 10-month low, down 35% from August highs.

The standout on alts is HYPE. Record $25.5M ETF inflow in a single session, and an Anchorage-routed wallet cluster has accumulated 2.38M HYPE ($135M) over five weeks. HYPE has decoupled from the broader market since the start of the year. Hallmark of a major token forming.

BTC sitting on $75-76k support. Hold and $80k retest is in play. Break and $70-72k opens up fast with no ETF bid underneath. Positioning is clean (funding neutral, basis 2-4%), so no real fuel to convincingly call direction in the short term

Our take:

“Equities continue to run while crypto is taking a breather"

The macro improved this week and crypto still didn't show up, which is telling.When the headwind eases and BTC still can't catch a bid, the issue isn't macro, it's the marginal allocator. Two weeks of $1B+ ETF outflows after six weeks of inflows tells you institutions are using strength to crystalize some of the most recent +ve price performance.

The bigger thing to watch is AI. Nvidia delivered a textbook blowout and after-hours barely moved. Incremental beats are no longer moving the needle. If AI momentum fades, the macro picture (record-low sentiment, sticky inflation, Warsh inheriting a hawkish Fed) gets a lot more weight, and crypto won't be insulated.

Structure is intact (reserves at multi-year lows, long-term holders accumulating, CLARITY moving, HYPE doing what major tokens do early). But short-term flow drives price, and it's negative.$75-76k is the line. If we hold here, low $80s K BTC is back in play. Break it and $70-72k opens fast. The bull case needs institutions back in. We currently see them taking a breather. Time will tell if this is only temporarily.