Market Commentary: Institutional Rotation & Crypto Realignment and more

Week Ending May 5, 2025

• U.S. GDP contracted by 0.3% in Q1, with a record drag from net exports due to tariff-related stockpiling; equities dipped midweek despite strong tech earnings.
• Institutional activity continues to centre around tokenization and stablecoin infrastructure, with Libre announcing a $500M Telegram bond fund on TON and Mastercard launching stablecoin settlement rails.
• UAE moves forward on a Central Bank approved Dirham stablecoin, while U.S. stablecoin issuers prepare for a regulatory breakthrough.
• Weekly jobless claims rose to 241,000, the highest since late 2021, but the broader labour market remains resilient. The U.S. economy added 177,000 jobs in April, above consensus (133,000), and the unemployment rate held at 4.2%. Wage growth moderated slightly, with average hourly earnings rising 0.2% month-over-month and 3.8% year-over-year, indicating healthy but decelerating momentum. This balanced employment picture may support the Fed’s current wait-and-see stance heading into the May 7 FOMC meeting, where no immediate rate change is expected, but guidance will be closely watched.

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Capital Rotation & Labor Market Stress

Investor allocation continues to shift away from the U.S. amid policy unpredictability. The signs:

• Bitcoin saw $420M in U.S.-listed ETF inflows, based on CoinShares data, as institutional interest stayed elevated despite rate and trade risks.

With the combination of mixed economic growth, solid U.S. labour market with a hint of softening labour data, the Fed appears to be on pause for May FOMC. The geopolitical and fiscal developments remain key watchpoints for allocators.

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Digital Assets: Volatility, Velocity, and Value

Bitcoin reclaimed momentum this week, surpassing $97,500 on May 2nd before settling just below $97,000. The move was driven by strong ETF inflows, healthy spot market demand, and institutional buying following product announcements. BTC continues to benefit from its digital gold narrative amid global macro uncertainty. Notably:

• Mining economics have turned negative, with CoinShares estimating the average cost to mine one BTC now exceeds $137,000, driven by energy prices and hash complexity. This trend may impact miners and the mining industry to search for more cost effective funding for operations..
• A suspected theft of 3,520 BTC (~$330M) on Sunday drove a 50% surge in Monero (XMR), which was used to obfuscate the funds across six exchanges. XMR traded up 35% in 24 hours on illiquid volumes.

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Stablecoins & Tokenization: Infrastructure in Motion

This week saw major developments across stablecoin rails and real-world asset (RWA) tokenization:

• Mastercard announced stablecoin settlement support, enabling users to spend, earn rewards, and withdraw stablecoins via traditional payment rails. Partners include OKX, Circle (USDC), and Paxos.
• In the UAE, FAB, ADQ, and IHC revealed a Central Bank - backed Dirham stablecoin to be launched on the ADI blockchain. The move reinforces the UAE’s digital infrastructure push and signals growing regulatory openness in the GCC.
• World Liberty Financial’s USD1 stablecoin, supported by BitGo and integrated into Tron, will be used for a $2B stake acquisition in Binance by MGX — marking a high-profile institutional use of a U.S. dollar-pegged stablecoin.
• Libre announced plans to tokenize $500M in Telegram corporate bonds on The Open Network (TON). These tokenized bonds — backed by Telegram’s outstanding debt — will be available to institutional investors via the Telegram Bond Fund (TBF), and eligible for use as collateral in TON-based DeFi. Libre has previously tokenized over $200M in assets from institutions like BlackRock and Brevan Howard.

Together, these developments confirm the institutional pivot toward regulated, use-case-aligned stablecoins and credit-grade tokenized instruments — a space M2 is well-positioned to engage with in future product expansions.

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Global Market Overview

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Equities

Markets posted a modest recovery this week, avoiding a retest of prior intraday lows. U.S. equity indices were supported by strong corporate earnings and stronger than forecasted US NonFarm Payroll (Arp) and contained volatility despite lingering tariff concerns. The S&P 500 rose 0.3%, while the Nasdaq gained 0.7%, helped by earnings strength from the tech-heavy Magnificent 7.

In Europe, Euro Stoxx 50 ended the week up 0.2%, buoyed by softer energy prices and cooling inflation data. Eurozone annual CPI remained at 2.2%, with services inflation ticking up to 3.9% and energy prices falling 3.5%, easing pressure on the ECB.

Investors are now sharply focused on forward guidance, particularly around supply chains and tariff impact. Apple’s earnings call flagged exposure to Chinese trade policies, while Alphabet and Tesla last week warned of reduced margins and ad revenue pressure tied to new trade rules.

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Bonds

Fixed income markets showed notable divergence. The U.S. 10-year Treasury yield rose 6 bps to 4.10% as inflation expectations remained sticky and labour market data surprised to the upside. In Europe, Bund yields remained stable at 2.46%, underlining the ECB’s current data-dependent stance. No major breakout in yields occurred, but curve flattening suggests market caution ahead of upcoming rate guidance.

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U.S. GDP Contraction: Why It Matters

Q1 U.S. GDP fell 0.3% annualized, its first contraction since early 2022, below Wall Street’s +0.4% consensus. The main driver was a record 5% drag from net exports, as firms rushed to import goods ahead of the Trump administration’s second-quarter tariffs. Consumer spending slowed to +1.8%, its weakest pace since mid-2023, and government spending declined due to cuts by the Department of Government Efficiency.

While underlying demand held firm — with final sales to private domestic purchasers up 3% — the signal is clear: tariff-induced volatility is distorting growth, pressuring margins and contributing to de-risking in equity portfolios. Stocks dipped midweek on the data release, with investors now recalibrating expectations for Q2 and watching for additional fiscal measures or trade announcements.

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Key Takeaways

Tariff-driven GDP volatility is real: First-quarter contraction reinforces the fragility of current U.S. growth and trade policy dependence.

1. Tariff-driven GDP volatility is real: First-quarter contraction reinforces the fragility of current U.S. growth and trade policy dependence.
2. Digital rails deepen: From Mastercard’s integration to TON’s bond issuance, on chain finance continues to pull institutional capital toward programmable, stable settlement layers.
3. BTC resilience persists amid structural stress: Despite mining inefficiencies and macro noise, investor demand continues to support price and ETF flows.
4. The UAE is advancing its digital frontier: Between the FAB stablecoin and USD1 integration, the region is staking out its role in regulated digital money infrastructure.
5. Labor data warrants attention: Rising jobless claims, modest wage growth, and steady unemployment rates suggest underlying weakness that markets are only beginning to price in.

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Looking Ahead: Economic Events to Watch (May 6–12)

• FOMC Member Speeches (All Week) – Clarifying monetary policy stance post-GDP.
• ECB Economic Bulletin (May 9) – Insights into Eurozone inflation outlook.
• U.S. Consumer Credit Report (May 7) – Key for assessing household balance sheet strength.
• Galaxy Shareholder Vote (May 9) – Decision on Nasdaq listing, with implications for digital asset equity flow.
• CPI Print Next Week (Preview: May 15) – May’s headline event.