Cracks Underneath The Surface

Macro

The S&P 500 and Nasdaq closed at fresh all-time highs, capping their strongest monthly performances since 2020. As some Hormuz fatigue sets in, 1Q26 U.S. earnings took centre stage with 84% of companies beating. Apple, Alphabet, and AWS all delivered. AI capex guidance came in hot.

The cross-asset picture tells a different story. Brent led the week at +8.9%, with equities up modestly (Nasdaq +1.55%, S&P +0.94%). BTC flat, ETH down 2%, gold off 2.3%. Energy is repricing higher while risk assets grind on earnings momentum and everything else treads water. The question is how long that divergence can hold, because the two forces driving it are both unresolved and pulling in opposite directions.

The FOMC held at 3.50-3.75% but drew 4 dissents, the most since 1992, split between wanting a cut and wanting to remove any easing bias entirely. The Fed is genuinely divided on whether the energy shock is transitory or structural. Powell's likely last meeting as chair, though he's staying on the Board through 2028, limiting Trump's ability to reshape the committee. Warsh chairs his first meeting June 16-17th with a new dot plot. Jobs report (178k, 4.3%) changed nothing.

Meanwhile, Iran submitted a 14-point proposal to reopen the strait while deferring nuclear talks. Trump says he's reviewing it. But today the U.S. launches "Project Freedom" to guide ships through Hormuz with destroyers and 100+ aircraft. Iran warned it will attack. Shipping traffic is down 90%.

The headline numbers across earnings and market performance look strong. The underlying dynamics of macro and geopolitics look less convincing. The rally is being carried by a shrinking number of names, energy is diverging from equities, the Fed is fractured, and the geopolitical backdrop could flip in either direction on a single headline.

Digital Assets: Testing the Ceiling

BTC absorbed a week of FOMC, MAG7 earnings, and oil volatility without breaking. That in itself is information. Price closed at ~$79k, holding near the top of its range for the third consecutive week. The $80k level continues to reject every attempt. BTC hasn't closed above its 200-day MA at ~$82k since October 2025. Breaking it would be the first trend reversal signal this year. Failing again keeps the range intact.

The structural picture underneath continues to strengthen. April ETF inflows hit $2.6B, the strongest month since October 2025, with BlackRock's IBIT capturing 70%. But the month closed with $491M in outflows across three sessions, a reminder the bid can turn. On-chain, exchange reserves are at a 7-year low with 170,000 BTC moving off exchanges over six months. At the same time, whale accumulation has increased significantly. The on-chain data is as constructive as it's been all year, but none of that matters IF the macro rug gets pulled.

On altcoins, the dispersion we flagged last week is accelerating. The broad complex is flat but individual names are moving on their own fundamentals rather than trading as a single basket.

Our take:

“The bid is real. The question is whether it's enough."

There are two competing frameworks for where BTC goes from here.

The bears say the market is stretched, the energy crisis is unresolved, and BTC is following a familiar bear market pattern of bearish flags before bottoming, which historically lands 300-400 days post ATH. We are just past 200.

The bulls say this cycle is structurally different because institutions, not retail, are driving the market. Retail left after October and is parked in equities. Meanwhile, a meaningful majority of BTC flow is now coming through ETFs and digital asset treasuries. These are longer-term players, and with much of the pain already absorbed, BTC can grind higher without retail participation.

The reality sits in between. The institutional bid is real but based on our OTC flow, that bid is reducing in magnitude compared to lower BTC levels. BTC can grind up on low spot volume, but the question is whether that grind creates enough FOMO for the "bottom is in" narrative to become self-fulfilling.

What matters more right now is what is underneath this rally. Equity markets are ripping on Q1 earnings and a perceived stronger U.S. hand in the Iran conflict. Part of this BTC recovery is that exuberance spilling over. If macro breaks, BTC likely goes with it. The store of value narrative took a hit earlier this year when BTC sold off alongside everything else, and that correlation has not been broken.

So this comes down to whether Trump, who is hyperfocused on markets heading into midterms, can thread the needle on the Middle East without the energy shock hitting the real economy. If he does, the setup looks good. If not, expect chop on macro shocks rather than a trend in either direction.