Crypto Market Commentary

• April PPI came in mixed this morning, with a large upside surprise in MoM readings (0.5% vs. 0.3% exp.) and YoY metrics largely in line with expectations. The upside in the MoM reading was offset by March figures being revised downwards. Yields initially spiked upon the data release but have turned negative across the curve. Equities are showing mild gains as attention shifts towards tomorrow’s CPI data release. The SPY 0.42%  has gained 0.17% and the QQQ 0.47%  has gained 0.31%. Crypto assets are declining today, with BTC 0.51% (-1.74%) falling back below $62k while ETH 2.90% (-1.56%) is trading at $2,900. The State of Wisconsin Investment Board disclosed a $99 million investment into Blackrock’s Bitcoin ETF (IBIT -1.92% ), making it the second-largest reported global holder, as well as a $63 million position into Grayscale’s (GBTC -1.94% ). The investments represent a small portion of the fund’s total AUM of $37.8 billion but carry significance in displaying the type of asset managers Bitcoin can potentially attract.
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• Tornado Cash developer Alexey Pertsev was convicted of money laundering charges in the Netherlands and sentenced to five years and four months in prison. Tornado Cash is a crypto mixer tool that will route funds through numerous transactions and routes before ending at a designated address, allowing potentially shady users from obscuring the origin of funds. Perstev was convicted of laundering $1.2 billion in crypto through the mixer tool between 2019 and 2022. As one of the tool’s developers, Perstev is being held accountable for money laundered through the platform even though he cannot control what users use Tornado Cash for. It sets a somewhat dangerous precedent for the treatment of open software developers and begs the question of whether they should be held liable for the actions of people using their tools. Perstev and his legal team have fourteen days to appeal the decision. One of Perstev’s co-developers, Roman Storm, is set to go on trial in the U.S. in September for similar charges.
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• As we outlined last week, LayerZero Labs implemented a novel program to prevent Sybil farming of its upcoming airdrop. Users could self-report or report others for Sybil farming in exchange for 15% of their allocated airdrops. The program has been an overwhelming success over the past week. Over 100,000 addresses have self-reported their farming activity already. LayerZero founder Brian Pellegrino took to Twitter to announce progress and stressed the significance of having a verified data set of over 100,000 Sybil wallets for detecting future activity. May 17th is the cutoff to self-report, and then LayerZero will release the list of addresses it has identified as Sybil users, which won’t receive any airdrop allocation. LayerZero’s token, ZRO, is widely expected to launch before the second quarter ends. 

Technical Strategy

• Ethereum’s decline has started to lose a bit of steam, and ETH 2.90% has approached a level of strong downside support that’s unlikely to be broken ahead of prices reversing course to push back higher in the weeks and months to come. Structurally, a further drop under May 1 lows at 2813 would help complete the end of the recent decline from an Elliott-wave perspective, as this would allow the chart to show symmetry with the prior pullbacks. Additionally, DeMark-based counter-trend exhaustion should be in place within a week using indicators like TD Sequential and TD Combo which were both present near March peaks (as Sells) and now are close to completion as downside exhaustion for possible buy signals. Finally, intermediate-term uptrends from last October 2023 lows now intersect right near current levels which should represent solid support toward thinking this recent pullback has nearly run its course. Bottom line, this weakness from March 2024 highs looks close to completion. While a break of May lows cannot be ruled out, it’s unlikely that the April intra-month lows of 2537 should be violated into next week and the ideal risk/reward area for buying dips looks to be near 2600 into 2750 with a number of different projections from a price perspective along with time. Any rally back over 3056 ahead of a final period of weakness into end of week would suggest that lows might already be in place. Upside targets would then center on 3725 followed by 4088.