Dear Investors,

We have an interesting positioning with the newly received CPI & PPI data, plus the upcoming ETH Spot ETF deadline.

In This Letter

• Inflation under control

• First positive inflows in 5 weeks

• Eyes on ETH ETFs

• The US Debt

• How we see the market

Inflation under control, ECB to lower rates in June.

The US CPI and PPI numbers are in and aligned with the expectations, calming investors the situation is getting under control.

The S&P 500 and Nasdaq hit a new all-time high (ATH), BTC is up 7% this week, while ETH is lagging behind due to approaching ETF approvals.

The European economy is heading for the ‘soft landing’ and analysts anticipate the ECB to cut rates by 25 points on June 6.

There is a rising concern over the Eurozone's fiscal deficit, but unless there are sudden unexpected costs, such as escalating war, it is still under control.

First positive inflows in 5 weeks (US$130m).

The majority flows in BTC (+$144m), while ETH experiencing outflows (-$14.4m) due to ETF application uncertainty.

According to 13F reporting, 937 professional funds invested in the BTC ETFs in the first quarter.

That’s 886% more than gold ETFs saw in their first quarter.

The total amount on 16 May 2024 is $12.4 billion, with IBIT (BlackRock) leading the way by far.

And who are the biggest buyers?

Advisory firms and RIAs, big banks, and hedge funds. Recently even the state of Wisconsin made a $150m decision, or Cambridge Investment Research with $40m+ holdings. Pension funds are coming.

Eyes on ETH ETFs

Next week (23rd) is the final deadline for one of the spot ETH ETF applications.

Low interaction by the US regulators with ETF issuer applications increased speculation that the ETF approval will not happen.

This has been reflected in Ethereum outflows and underperformance compared to BTC.

It will be important to see how the SEC decides, but also why. Likely because of low interaction, less likely the SEC will try to push ETH as an unregistered security.

Meme stocks (and coins) are back.

In the first quarter of 2024, short-sellers of GameStop sit on unrealized $392m gains, up nearly 50%.

But on Monday, one meme on X (Twitter), and these short-sellers wiped out their gains with more than a $1.2b loss. In 2 days.

The same influencer posted yesterday a video about crypto.

Retail is ready for more risk and volatility.

There is still one problem on the horizon - the US debt.

According to the Treasury Department, the federal government has so far spent $855 billion more than it has collected in the 2024 fiscal year, which began on October 1.

Ray Dalio, founder of the world’s biggest hedge fund Bridgewater Associates, and Jamie Dimon, CEO of JPMorgan, both warned this week that rising debt is a ticking bomb that the government needs to address before the markets trigger it.

If triggered, there might be a bigger supply of US Treasuries than demand, making it difficult for the US to service its debt.

How we see the market.

We are aligned with the consensus that ETH ETFs are unlikely to be approved next week.

However, with the macro outlook getting better, inflows from major financial institutions coming back, and elections in the autumn, we see this as one of the last chances to buy before the bull market really starts.

That’s why we are increasing our positions with DCA, buying before the ETF deadline, with some reserve if the ETF rejection is not fully priced in.

The focus remains on the EVM ecosystem - although ETH underperformed YTD, its long-term positioning remains strong with persistent demand and the potential to outperform later in the cycle as major institutions test their use cases.

Regards,