Market Commentary

WARSH CONFIRMED — A NEW ERA AT THE FED

On Wednesday May 14, the Senate confirmed Kevin Warsh as the new Fed Chair in a 54-45 vote, on mostly party lines — Senator John Fetterman (D-PA) was the only Democrat to vote in favor. On Tuesday, Warsh had been approved as a Board Governor in a 51-45 vote. Powell's chairmanship expired Thursday May 15, completing a transition that was in doubt until the last moment due to Senator Tillis's block (conditioned on resolving DOJ investigations into the Fed).

Warsh inherits a divided Fed and a complex monetary policy environment. During his hearing, he argued that artificial intelligence will boost worker productivity, enabling rate cuts without generating inflation. However, Democrats on the committee expressed concern that Warsh will adjust his stance according to White House pressures. His first FOMC meeting as Chair will be in June.

APRIL INFLATION — MORE PERSISTENT THAN ESTIMATED

April CPI (released Tuesday May 13) accelerated to 3.8% annually — the highest level since May 2023 — with a 0.6% monthly increase, driven by energy costs and food prices. Core CPI (excluding food and energy) rose to 2.8% annually, up from 2.6% in March, reflecting broader inflationary pressures. April PPI (released Wednesday May 14) surprised with an annual jump above 6%, its highest reading in months. The data triggered a risk-asset selloff: the S&P 500 fell -0.16% Tuesday and semiconductors led declines (Qualcomm -13%, Intel -8%). BTC briefly fell below USD 80,000.

The data complicates Warsh's outlook: headline inflation accelerated from 3.3% to 3.8% and core rose from 2.6% to 2.8%, potentially limiting the space for rate cuts the White House expects.

GEOPOLITICS — DUAL BLOCKADE CONTINUES, NEGOTIATIONS UNCERTAIN

The indefinite ceasefire with Iran continues but remains fragile. The dual naval blockade persists: the U.S. blocks vessels to Iranian ports, and Iran restricts Gulf traffic. Secretary Rubio indicated on May 5 that negotiations are addressing both enrichment capabilities and existing enriched material. WTI held around USD 100–105/bbl during the week, with Brent at ~USD 102–107. The White House declared on May 1 that "hostilities that began on February 28 have terminated," but the naval blockade remains active.

EQUITIES — ATH MONDAY, INFLATION PULLBACK

Monday saw the S&P 500 reach a new intraday ATH, driven by semiconductors (Micron +37% the prior week). However, Tuesday it pulled back -0.16% to 7,400.96 after the CPI, and the Nasdaq dropped -0.71% to 26,088.20. Thursday partially recovered. The S&P 500 holds around 7,400 — at historic highs but with rising volatility.

Bitcoin (BTC): Trades around USD 79,235, pulling back modestly after the inflation-driven selloff. BTC briefly dipped below USD 80,000 Wednesday when PPI surprised to the upside, but quickly reclaimed the level — a signal that underlying demand at USD 78,000–79,000 remains intact. ETF outflows (-USD 705.10MM) were the year's most severe, but price has not retracted proportionally, reflecting non-ETF absorption. The 200 DMA at ~USD 85,000–86,000 remains key resistance. Support at USD 78,000–79,000; resistance at USD 80,600.

Ethereum (ETH): Trades around USD 2,225, with the largest percentage decline of the three assets (-3.3%). ETH was particularly impacted by ETF outflows (-USD 189.50MM), with BlackRock's ETHA posting outflows all four days. Tuesday was the most severe session: -USD 130.60MM (ETHA -102.00MM). ETH continues demonstrating greater sensitivity to macro risk-off episodes. Support at USD 2,150–2,200; resistance at USD 2,300–2,350.

Solana (SOL): Trades around USD 89.60, with a marginal -0.6% decline — the greatest relative resilience among the three assets. SOL was the only asset with positive ETF flows all week (+USD 58.20MM), its best week of the year. BSOL accumulated +USD 41.40MM. The divergence between SOL flows (positive) and BTC/ETH (massively negative) suggests institutional allocators are rotating toward SOL as a differentiated position within the Digital Asset ecosystem. Support at USD 86–88; resistance at USD 90–95.

The Tuesday and Wednesday inflation data triggered a significant reconfiguration in derivatives markets. Cumulative liquidations in the 48 hours following the PPI exceeded USD 400MM, with long positions representing the majority of liquidated volume. This reflects that a relevant portion of the market was positioned for an upside breakout above USD 80,000, and the inflation data forced exit of those positions.

Funding rates fell into negative territory on Wednesday — indicating perpetual contracts traded below spot and bearish positioning increased temporarily. By Thursday, funding rates normalized aligning with the partial ETF recovery (+131.30MM in BTC). The speed of normalization suggests the liquidation episode was tactical, not structural.

In options, demand for puts (downside protection) increased significantly around the USD 78,000 and USD 75,000 levels, reflecting institutional investors hedging risk of a deeper pullback if inflation continues surprising to the upside. The USD 80,000–80,600 zone (negative gamma) rejected price this week, confirming its technical relevance.

BTC: The -USD 705.10MM represents the year's most negative week, surpassing the -USD 467.00MM from Week 18. Wednesday was the year's most severe session: -USD 630.40MM, with IBIT -284.70MM, ARKB -177.10MM, and FBTC -133.20MM — a coordinated liquidation across the three main ETFs coinciding with the above-expectations PPI release. These inflation figures complicate the "transitory inflation" narrative that had underpinned the prior weeks' rally, and regulated capital allocators responded by immediately reducing exposure. Monday had been modestly positive (+27.20MM, led by MSBT +26.30) and Thursday recovered with +131.30MM (IBIT +144.10), suggesting the profit-taking concentrated in the immediate data reaction and does not represent a structural trend change.

ETH: The -USD 189.50MM marks the second consecutive week of negative flows. Tuesday was the most intense session: -USD 130.60MM with BlackRock's ETHA posting -USD 102.00MM — the largest single-fund daily outflow for ETH this year. Fidelity's FETH accumulated -USD 55.70MM for the week. The pattern confirms ETH functions as the highest macro-sensitivity asset within the ETF offering — in risk-off episodes, allocators reduce ETH first and more aggressively than BTC.

SOL: The week's most notable divergence. While BTC and ETH registered massive outflows, SOL accumulated +USD 58.20MM across four consecutive positive sessions — its best week of the year. Bitwise's BSOL concentrated +USD 41.40MM (71% of total), followed by Fidelity's FSOL with +USD 10.40MM and Grayscale's GSOL with +USD 6.40MM. This institutional rotation toward SOL during a generalized risk-off episode is structurally significant: it indicates a portion of institutional capital views SOL as a differentiated position within the ecosystem, not an asset correlated to the BTC/ETH cycle. The Alpenglow upgrade and digital commodity classification continue acting as medium-term catalysts for this flow.