Wall Street Scrambles for Bitcoin as Coinbase Premium Surges Past $100
Digital Asset Market: Coinbase Bitcoin price premium to Binance is above $100 in recent days, signaling surging US demand for Bitcoin and marking the highest difference since February, according to data from CryptoQuant. This elevated premium suggests significant buying activity from US investors, with no signs of market overheating, pointing to continued bullish momentum potentially through 2025. At the same time, spot exchange reserves are dropping rapidly, with over 550,000 BTC withdrawn from exchanges since July 2024, an indicator that investors are increasingly holding their coins for the long term rather than selling, reinforcing supply-demand dynamics that could further support upward price momentum.
Meanwhile, BlackRock's iShares Bitcoin Trust (IBIT) has become the fastest-growing ETF in history, reaching $70 billion in assets under management in just 341 trading days, far surpassing the previous record set by SPDR Gold Shares, which took 1,691 days to achieve the same milestone. This explosive growth mirrors Bitcoin's ongoing rally, with the cryptocurrency trading around $109,000 and close to its all-time high. BlackRock now holds over 663,000 bitcoin, solidifying its position as a leading institutional investor in the space. The rapid success of IBIT highlights a growing appetite among investors for regulated Bitcoin products.
Macro Economics: The World Bank has significantly lowered its global economic growth forecast for 2025 to 2.3 percent, down from the earlier projection of 2.7 percent, citing trade uncertainty as a major factor behind the slowdown. This would represent the slowest global growth since 2008, excluding times of recession. The Bank also cut its growth outlook for the U.S. to 1.4 percent and for the euro area to 0.7 percent, warning that further escalation of trade tensions could dampen growth further. However, the Bank noted that resolving trade disputes and reducing tariffs could improve prospects, potentially increasing global growth by about 0.2 percentage point on average over 2025 and 2026. These concerns mirror those of the OECD, which also revised its 2025 global growth forecast downward to 2.9 percent, highlighting the impact of ongoing trade and tariff uncertainties.
Equities: US stocks were mostly flat on Tuesday as investors watched renewed US-China trade talks, which entered their second day after an encouraging start. The Dow was little changed, while the S&P 500 gained 0.2 percent and the Nasdaq rose 0.3 percent, reflecting a cautious mood as negotiations centered on key issues, including access to China's rare earth minerals. Uncertainty remains high due to previous swings in President Trump's tariff policies and ongoing trade tensions, causing Chinese stocks to fall amid investor nerves. While a US small-business optimism index improved in May, concerns linger over the impact of Trump's fiscal policies. Investors are now awaiting the May Consumer Price Index report for further clues about inflation and the broader economic outlook. Key movers included Topgolf, Callaway Brands, and SolarEdge, which all rose after positive developments, while Insmed surged on favorable results from a drug trial. Meanwhile, strong revenue growth lifted Taiwan Semiconductor, which rallied on better-than-expected profits. Apple and Tesla both edged higher, with Tesla rebounding after President Trump's public comments about CEO Elon Musk. At the same time, McDonald’s fell following a double downgrade due to concerns about customer traffic and growth prospects.
The Fed and US Treasury: In May, the U.S. inflation fears eased as President Donald Trump softened his stance on proposed tariffs, according to the New York Fed’s Survey of Consumer Expectations. The survey showed a notable decrease in the one-year inflation outlook to 3.2 percent, down 0.4 percentage points from April, and slight declines in the three- and five-year forecasts. While these expectations remain above the Federal Reserve’s 2 percent annual target, the drop represents progress and suggests a waning impact of tariff-related anxieties. This moderation in inflation expectations, alongside lower core price indexes and improving confidence in jobs and financial markets, provides a supportive backdrop for the Fed as it considers future interest rate decisions. The data may bolster arguments for maintaining or even easing rates, as inflation pressures appear to be receding despite ongoing tariff negotiations and some isolated price increases, particularly in the food sector.
Geopolitical: Unhinged fear-mongering is driving NATO’s latest push for massive military spending increases, with new Secretary General Mark Rutte echoing Donald Trump’s old demands as he urges European allies to make a “quantum leap” in defense, including a staggering 400% hike in air and missile defense budgets and aspiring to 5% of GDP on military outlays. Warning Europeans to “invest now or learn Russian later,” Rutte claims the continent faces an existential threat unless it rapidly accelerates arms procurement, logistics, and support capabilities, even as Canada pledges to meet funding targets and NATO ministers plan new policy benchmarks. Critics note that this dramatic escalation relies on Cold War-style rhetoric and assumptions about Russian intentions, lacking evidence of expansionist designs beyond Ukraine. As the alliance confronts internal debate and skepticism about the necessity and wisdom of such a militarized stance, this is a concern.
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Bitcoin Demand Accelerates as Supply Tightens
Bitcoin continues to show impressive strength, driven by growing adoption among corporate treasuries. Recent additions, such as Quantum BioPharma's $5 million BTC acquisition and KULR Technology's bold $300 million Bitcoin treasury strategy, reflect a broader shift toward viewing Bitcoin as a strategic reserve asset. This trend is occurring against the backdrop of a sharply diminishing supply, a factor we've emphasized throughout the past month. Indicators such as the Coinbase BTC premium over Binance and the rising market cap of BlackRock's IBIT ETF further underline the escalating demand. Although downside risk remains, the potential for a major upside breakout is mounting, setting the stage for a possible new all-time high in the next bull cycle.
Markets Jittery as US-China Trade Talks Teeter
Beyond crypto, global financial markets are closely watching developments in U.S.-China trade negotiations. While Secretary of Commerce Howard Lutnick recently claimed talks are “going well,” investor sentiment remains cautious. Markets have been hearing similar reassurances for several weeks now, yet have seen little in the way of sustained positive price action to confirm meaningful progress. At stake are agreements around the export of advanced technologies and industrial components, with China reportedly offering improved foreign access to its economy and rare earth minerals. These 17 critical elements power everything from smartphones and electric vehicles to medical imaging tools. Given Beijing's near-total dominance of the rare earth supply chain, even small shifts in trade terms could ripple across industries worldwide.
Short-Term Optimism Amid Long-Term Skepticism
Markets remain cautiously optimistic as US-China trade talks continue, but skepticism is mounting. Despite repeated assurances from officials like Howard Lutnick that discussions are “going well,” the market has yet to reflect any sustained optimism. This disconnect suggests investors are waiting for tangible outcomes rather than rhetoric. Historically, China has agreed to terms in principle only to backpedal later, which tempers expectations and reinforces the view that any breakthrough could be short-lived.
China is expected to leverage its significant strengths at the negotiating table, especially its dominance in rare earth minerals and expansive manufacturing capacity. These strategic assets are central to US demands around tech and industrial access. While incremental progress could provide temporary support for equities, commodities, and crypto markets, we believe a comprehensive resolution remains distant.
Until clearer signs emerge, risk assets may benefit from episodic momentum, but underlying uncertainty will persist. Investors should remain prepared for both modest upside and potential setbacks as negotiations unfold.
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The 1Konto Team
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