May Newsletter: Macro Dominates Everything, but Bitcoin Dominates Crypto

Introduction: Navigating the New Crypto Order

April has laid bare the truth investors can no longer ignore: markets are no longer steered by fundamentals but by policy whiplash, geopolitical unpredictability, and liquidity scarcity. This month’s edition of Event Horizon Capital's Emerging Narratives dissects that reality, zooming in on Bitcoin’s rising macro role, Ethereum’s pivotal Pectra upgrade, and institutional capital flows reshaping the investment landscape. In a world gripped by tariff battles and fiscal power plays, Bitcoin is reasserting itself as a non-sovereign hedge, not just a speculative tech asset. Meanwhile, Ethereum is entering a new chapter of usability and scalability, readying itself for the next wave of network growth. Whether you're allocating capital, managing risk, or simply tracking sentiment, this issue offers a clear view through the policy fog.

Macro: The Illusion of Stability

April may have marked a symbolic turning point, but for global markets, the underlying story remains the same: an uneasy standoff between monetary policy, fiscal dynamics, and erratic geopolitical interference. Despite signs of bottoming across traditional indicators—peaking credit spreads, a softening VIX, and extreme investor pessimism—markets remain hypersensitive and fragile. This fragility is especially pronounced in crypto, where liquidity remains thin and a single policy headline or tariff tweet can derail price action.

We are not in a classically macro-driven environment. This is a policy-driven regime, dictated not by inflation prints or GDP estimates, but by the unpredictable churn of tariff negotiations and trade rhetoric. Every attempted recovery across asset classes, including crypto, risks being snuffed out by another round of geopolitical friction. Traditional economic indicators may flash green, but they’ve become less predictive in an environment dominated by political volatility.

Growth Contraction Without Panic

Recent macroeconomic data underscores this contradiction. U.S. GDP contracted by -0.3% in Q1 2025, a move widely anticipated due to tariff-induced slowdowns, yet still capable of rattling markets intraday. It wasn’t the number that shocked—it was the market’s hair-trigger response. In thin liquidity conditions, even expected outcomes can spark volatility. Despite a weakening economic backdrop, this contraction does not appear to reflect systemic risk. Real wages remain positive, delinquencies are falling, and U.S. consumers, though selective, are still spending. Robust earnings from mega-cap firms confirm that core business fundamentals remain intact.

But in today’s environment, fundamentals take a back seat to uncertainty. CEOs have openly acknowledged the difficulty of forecasting under a tweet-driven policy landscape. And as forward guidance becomes murkier, capital allocators are forced to remain defensive.

The Fed’s Dilemma and Treasury’s Power Move

Wednesday’s upcoming FOMC meeting holds significance, not for what the Fed will do, but for what it won’t. The market is begging for rate cuts. Two-year Treasury yields have fallen below the Fed’s target rate—a historically reliable signal that current monetary policy is too tight. Yet the Fed is unlikely to act until tariff clarity emerges.

Here’s why: While inflation is softening and unemployment remains steady, monetary policy alone cannot override the fiscal and geopolitical uncertainties weighing on the economy. That brings us to a critical macro shift—fiscal dominance.

As analysts like Lyn Alden have noted, post-pandemic markets are increasingly shaped by the Treasury Department, not the Federal Reserve. This dynamic is on full display today. With a war chest of over $600 billion—built on a strong tax season and elevated equity returns—the Treasury has far more flexibility than it did during the last debt ceiling crisis. That means negotiations could drag into late summer, giving the government enough liquidity runway to operate without immediate compromise.

Moreover, Treasury Secretary Scott has hinted at expanding the bond buyback program, which could functionally mirror quantitative easing. By replacing illiquid legacy bonds with newer, more liquid ones, the Treasury could stimulate liquidity and indirectly ease financial conditions, without forcing the Fed’s hand.

Bitcoin Amid Geopolitical Flux

So what does this mean for Bitcoin?

In short, the asset is showing resilience. Bitcoin is quietly closing its performance gap with gold, reclaiming its role as a hedge against geopolitical and monetary disorder. While traditional assets flinch at each new tariff headline, Bitcoin has become increasingly uncorrelated with the broader macro noise, benefiting from the same structural shifts that weaken fiat reliability.

This policy-driven slowdown differs from the credit crises of the past. Tariff-induced contractions, while damaging, are more reversible. That makes Bitcoin uniquely positioned. In a world where the dollar’s supremacy is being questioned by rising trade barriers and fragmenting global alliances, Bitcoin’s appeal as a stateless, digitally scarce asset becomes more intuitive. Additionally, trade tensions may erode long-standing demand for dollar reserves, opening a window for parallel stores of value, from gold to digital assets.

If stagflation reemerges—a scenario defined by rising prices and stagnating growth—Bitcoin could benefit further. Like gold, it thrives when fiat credibility wanes. And while Bitcoin wasn’t around in the stagflationary 1970s, it now serves a similar portfolio function in a world more reliant on digital infrastructure.

A Closer Look at the Crypto Markets

We kicked off the year with a strong bullish setup for crypto: the first crypto-friendly administration, post-halving momentum, growing institutional adoption, and inflation cooling toward 2.9%. Bitcoin hit new highs in January, but early signs, such as weak altcoin performance and the Trump/Melania token launches, signaled froth. That strength quickly unraveled.

In February, aggressive trade policies from the Trump administration spooked markets. Stocks sold off, hedging activity spiked, and crypto crashed. Bitcoin dropped ~17%, while altcoins posted deep losses. The market turned risk-off fast.

March saw macro conditions tighten further. No Fed rate cuts, rising bond yields, and worsening trade tensions crushed equities. Yet Bitcoin held firm, down just 2%, while ETH and SOL shed over 20%. Capital rotated defensively into gold and treasuries, with Bitcoin beginning to show signs of a "digital gold" narrative taking hold.

By April, fear peaked. But hopes of tariff relief helped restore confidence mid-month. Bitcoin jumped ~15% and flipped positive on the year. Bitcoin broke past the $95k resistance and printed an intra-week high near $97.8k, its strongest level since late February. The breakout came with BTC dominance at 64.9%, a four-year high that shows fresh inflows are still crowding into the benchmark asset. The Fear & Greed Index sits at 65 (Greed), up from 25 a month ago but not yet in mania territory.

Institutional buying led the way: sovereign funds, hedge funds, and capital raises from firms like MicroStrategy, Gamestop, and Twenty One Capital poured billions into BTC. Michael Saylor’s Strategy (formerly MicroStrategy) added 15,355 $BTC for $1.42 billion at an average price of $92,737, bringing its stack above 553k $BTC. The buy, the biggest single corporate purchase since March, hit the tape days after the company filed a new $21 billion at-the-market stock offering to fund still more accumulation. The steady corporate bid is reducing tradable float and reinforcing the upside reflexivity.

Altcoins, however, remained subdued, still 50 %+ off their highs.

Altcoin Euphoria or False Dawn?

This divergence marks a defining feature of 2025: a clear decoupling between Bitcoin and the rest of the market. Bitcoin has evolved into a dual-role asset: a macro hedge and a high-beta tech bet. Stocks and altcoins continue to lag, and investors are becoming more selective, demanding actual catalysts or use cases before allocating beyond BTC.

Though crypto often trades in tandem with equities during macro shocks, April marked a shift. Thanks to institutional inflows, Bitcoin rallied even as stocks dragged. That said, crypto remains structurally more volatile. Its 24/7 nature, leverage-heavy instruments, and lack of defensives amplify price action in both directions. When sentiment flips, it does so violently.

Under the surface, crypto market internals tell a more nuanced story. While Bitcoin remains the dominant asset, altcoins have seen pockets of short-term momentum. Approximately 75% of altcoins are above their 50-day moving averages. But only 5% are above their 200-day trends, suggesting recent rallies may be short-lived.

In fact, just 17% of altcoins have outperformed Bitcoin over the past 90 days. The Altcoin Index shows underperformance across the board, and without stronger economic indicators, particularly a recovery in the ISM Manufacturing Index, sustained upside appears unlikely. The ISM has hovered in indecision for over two years, weighed down by prolonged U.S.-China trade tensions. Until these tariffs are rolled back or replaced with a more cooperative framework, true “risk-on” behavior may be limited to large-cap crypto assets like Bitcoin and Ethereum.

Conclusion: The Tariff Trap and the Bitcoin Opportunity

Markets, including crypto, are trapped in a low-conviction environment. Economic data continues to soften, but the real constraint is not inflation or employment—it’s policy paralysis driven by trade conflicts. Traditional forecasting tools offer little edge in a world where liquidity is thin, policy is reactive, and headlines move faster than fundamentals.

Bitcoin, by contrast, offers clarity. It is apolitical, antifragile, and increasingly validated by both institutional capital and long-term retail holders. In a world shackled by tariffs and fiscal distortion, Bitcoin remains one of the few assets unbound by central authority.

The longer global trade fragmentation persists, the more Bitcoin’s structural value proposition shines. Investors may still be cautious, but the macro writing is on the wall: Bitcoin is no longer a speculative sideshow. It’s a macro asset, and its time may be just beginning.  

Emerging Narratives

Bitcoin’s Institutional Surge

Bitcoin’s dominance now stands at ~64%, the highest level since 2021, reflecting renewed institutional interest and a consolidation of capital around BTC over alternative cryptocurrencies. Notably, Morgan Stanley is reportedly preparing to offer crypto trading on its E*Trade platform, signaling a deeper integration of Bitcoin into traditional financial services.

Institutional momentum continued despite macroeconomic headwinds. Strategy (formerly MicroStrategy) added another 25,000 BTC in April, bringing its total holdings to approximately 3% of Bitcoin’s circulating supply, valued at over $50 billion. Beyond that, Strategy (MSTR) has significantly expanded its Bitcoin accumulation goal, now targeting $84 billion as part of an enhanced 21/21 plan, reflecting heightened institutional demand. Backed by strong buy ratings from Benchmark and TD Cowen, the company has already secured $28.3 billion and intends to raise another $56.7 billion within the next 32 months.

Meanwhile, a new entity—Twenty One Capital—backed by Tether, Softbank, and Cantor Fitzgerald, has been launched with 42,000 BTC and plans to go public via SPAC. These developments reflect a growing bifurcation in the market: legacy financial institutions entering the crypto space, and crypto-native firms expanding into traditional finance. ING’s exploration of a stablecoin, Circle’s new payments platform, and Kraken’s foray into equity trading are just a few examples. As this convergence accelerates, ETF inflows and corporate treasury activity remain critical signals for tracking Bitcoin's strategic adoption.

Bitcoin as a Non-Sovereign Haven Asset Amid U.S. Volatility

• What’s New: Bitcoin is showing early signs of decoupling from traditional risk assets. Amid rising geopolitical instability, fiscal policy unpredictability, and weakening faith in U.S. institutions, bitcoin surged while equities and Treasuries faltered. This shift reflects a growing investor desire to exit U.S.-centric assets and seek alternative stores of value.  

• Why It Matters: Historically viewed as a risk-on, equity-correlated asset, bitcoin is now being reevaluated as a credible, non-sovereign store of value, alongside gold and the Swiss franc. While the correlation data hasn’t fully confirmed the narrative, market behavior suggests a possible structural transition toward bitcoin as a macro hedge.  

• Action Signal: Closely monitor correlation metrics and capital flows across FX, gold, and BTC to validate whether this decoupling trend persists. If confirmed, Bitcoin could attract greater institutional flows during global volatility cycles.

  
  

Ethereum’s Pectra Upgrade: Usability, Efficiency, and a New Chapter in Network Evolution

Ethereum is preparing for a major infrastructure upgrade, known as Pectra, that will significantly impact how the network operates, especially for validators, developers, and everyday users. At its core, the upgrade aims to improve usability, streamline staking mechanics, and increase data efficiency to support Ethereum’s broader role as a foundational blockchain.

Currently, Ethereum relies on a proof-of-stake model where validators secure the network by locking up 32 ETH. Pectra raises that ceiling dramatically, allowing validators to stake up to 2,048 ETH. This change supports operational efficiency, enables automated reward compounding, and alleviates congestion in the validator activation queue. These shifts could ultimately lead to greater ETH lockup, reducing circulating supply and potentially putting upward pressure on price.

Beyond staking, Ethereum wallets are also getting a usability overhaul. Temporary smart contract functionality will introduce features like gas fee payments in stablecoins, bundled transactions, and easier account recovery through familiar tools such as social logins. These additions lower the barrier to entry for new users and make crypto interaction feel closer to existing Web2 experiences.

Pectra also doubles the network’s data throughput by expanding from three to six blobs per block. This technical adjustment is particularly impactful for Layer 2 rollups like Base, which rely on Ethereum for data availability. By cutting data costs, Ethereum is improving scalability and reducing transaction fees across its broader ecosystem.

Headlines

⛓ Tornado Cash Beats the Feds (For Now)A Texas court just blocked the U.S. government from reimposing sanctions on Tornado Cash, marking a rare win for crypto privacy advocates—and a major blow to the Treasury's overreach playbook.

💥 PayPal’s Stablecoin Escapes SEC SpotlightThe SEC has backed off its probe into PayPal USD. For now, it’s game on for PayPal’s stablecoin ambitions—and a quiet signal that not every crypto product is a regulatory landmine.

🇸🇻 El Salvador Halts Public BTC Buys—But Keeps StackingTo secure a $1.4B IMF deal, El Salvador paused official Bitcoin purchases. But private buys? Still rolling in. The nation’s BTC bag keeps getting heavier, IMF or not.

📈 Galaxy Eyes Nasdaq as Crypto Stocks ReboundMike Novogratz wants Galaxy Digital trading on the Nasdaq, tapping into Wall Street demand for AI-meets-crypto exposure. A listing would mark a big step toward mainstream credibility.

💵 Tether Eyes U.S. Market With New StablecoinTether isn’t done yet. The stablecoin giant plans to roll out a new U.S.-focused stablecoin before year’s end—raising the stakes in the fight for regulatory-safe stable money.

🧠 BlackRock Bags $67.5M in Ethereum ETFBlackRock just invested $67.5M in Ethereum. This is a quiet move but a loud message: institutions are building ETH exposure ahead of the ETF wave.

🔓 Base Hits Vitalik’s Stage 1 MilestoneBase has officially reached “Stage 1” decentralization. With fault proofs, a multisig security council, and user-exit protections in place, the Coinbase-backed L2 is now less centralized and more censorship-resistant.

🧮 Scroll: First zk-Rollup to Reach Stage 1Scroll claims it’s the first zk-rollup to hit Ethereum’s “Stage 1” decentralization target fully. Thanks to its Euclid upgrade, censorship is out, exit guarantees are in, and liveness is now protocol-level.

Conclusion

The policy-driven world order is not a temporary phase—it’s the new base case. Traditional signals are decaying in predictive power, and liquidity remains the ultimate bottleneck. Crypto markets are adjusting in real time. Bitcoin has emerged as the standout beneficiary, absorbing institutional inflows and asserting its role as a macro hedge in the face of dollar degradation and fiscal distortion. Altcoins remain suppressed, fighting for relevance amid tightening capital allocation. Ethereum, however, is bucking the trend with a high-impact upgrade that strengthens its long-term network value.

For investors, the message is clear: adapt or fall behind. Bitcoin is no longer a fringe asset. Ethereum is no longer just a developer playground. Together, they represent the backbone of the new digital macro economy.