🚀 Bitcoin's New Correlation, ETH's L1 Revival & The Clarity Act Drama

📊 Markets Rally — But Is It Too Frothy?

The first week of May delivered all-time highs across equities — with the S&P 500 and NASDAQ pulling Bitcoin, Ether, and the broader crypto market along for the ride. Bitcoin climbed 4.5% for the week, clearing $80,000 with confidence and briefly touching $82,000. Ether gained a more modest 1.2%, as crypto prices continued to mirror broader risk-on sentiment.

But the question on everyone's mind: Are markets getting too frothy?

Bitcoin is now more correlated with the NASDAQ than ever before. According to data from the DeFi Report's Michael Nadeau, the 2026 correlation coefficient stands at 0.48, significantly higher than 0.1 in 2024. This marks the highest correlation Bitcoin has ever had with traditional equities — meaning crypto's destiny is increasingly tied to stock market performance, particularly the AI-driven mega-cap rally.

"Our destiny is in the stock market's hands right now."

The implication? Bitcoin is starting to behave like a "worse NASDAQ" — you get exposure to tech sentiment, but without the same magnitude of returns. For now, at least.

🤖 AI Is Dragging Everything Higher

The equity surge is being led by one dominant force: artificial intelligence.

The semiconductors sector gained 12.5% over two weeks, with names like Nvidia, Intel (up 60% over two months), and AMD posting massive returns. Industrials — including defense and AI infrastructure buildout companies — followed closely behind. Meanwhile, Google briefly overtook Nvidia as the world's most valuable company after crushing earnings, though Nvidia has since reclaimed the top spot.

Earnings season painted a remarkably strong picture. 85% of S&P 500 companies that have reported beat analyst estimates — many by significant margins, with companies posting earnings 20% above expectations on average. This marks the sixth consecutive quarter of double-digit earnings growth.

The star of the show? Anthropic, whose revenue and usage surged 80x year-over-year in Q1 2026. The company secured a major deal with SpaceX for additional compute, underscoring the insatiable demand for AI infrastructure. Anthropic's implied private market valuation on Hyperliquid now sits just shy of $1.2 trillion — not far behind Bitcoin's $1.6 trillion market cap.

"My demand for AI tokens is insane. I'm running out two to three times a day. If the rest of the market is doing this, everyone's demand is insatiable."

The narrative isn't abstract anymore — it's lived experience. AI tools are demonstrably driving productivity, revenue, and efficiency across sectors. Until that demand curve flattens, the AI trade remains structurally supported.

⚠️ But Wait — Are We Too Frothy?

Not everyone is convinced the good times will last.

Warren Buffett, ever the skeptical value investor, delivered a sobering note at 95 years old:

"The casino's gotten very attractive to people."

Berkshire Hathaway's cash reserves hit a record nearly $400 billion, marking the 14th consecutive quarter of net selling. Buffett has been aggressively trimming equity exposure, with cash now exceeding 30% of Berkshire's portfolio. In his 60 years of investing, he noted, there have been only about 5 years that felt genuinely inexpensive. This isn't one of them.

Structural concerns loom as well. US federal debt held by the public as a percentage of GDP just crossed 100% for the first time since 1946 — the aftermath of World War II. Back in 2000, that figure was just 31%. The US is now carrying wartime-level debt in peacetime, raising questions about fiscal sustainability and long-term growth.

Still, for now, markets remain resilient. The SPY is up 17% over 39 days since the Iran war bottom, with the NASDAQ up 24% over the same period. Whether this is a durable breakout or late-cycle euphoria remains to be seen.

🛢️ Iran: Oil Down, Tensions Paused

The standoff in the Strait of Hormuz remains unresolved, but pressure is easing.

Oil prices dropped sharply — down 15–18% depending on the benchmark — a significant relief for the global economy. Trump briefly launched "Project Freedom," an effort to forcibly open the Strait by escorting ships with US Navy protection. Iran responded with missile and drone strikes, which were intercepted. One strike did land on a UAE oil facility, causing a fire.

Within 48 hours, Trump paused the initiative and returned to negotiations in Pakistan. While nothing has fundamentally changed — the Strait remains closed, talks continue — the pain tolerance dynamic has shifted. 10-year Treasury yields fell 2.7% on the week, and with equities at all-time highs, the US is feeling less economic pressure. Iran, meanwhile, remains isolated.

Polymarket odds of a permanent US-Iran peace deal by June 30th sit at 53%, up 14 percentage points week-over-week. By year-end, the probability rises to 74%.

⚖️ The Clarity Act: Compromise, Conflict, and a July 4th Deadline

The Clarity Act cleared a major hurdle this week — but not without drama.

At the center of the debate: stablecoin yield. Banks, realizing they had failed to negotiate aggressively during the GENIUS bill, pushed back hard against provisions that would allow crypto platforms like Coinbase to offer users yield on stablecoin deposits. They argued this would threaten deposit stability and give crypto firms an unfair advantage.

After tense negotiations, a compromise emerged. The bill now prohibits "covered parties" from paying interest or yield to US customers solely for holding stablecoins — meaning idle balances that resemble traditional bank deposits cannot earn rewards. However, activity-based or transaction-based rewards remain permissible, including those tied to:

• Payments and transfers
• Market-making
• Staking and governance
• Loyalty programs

The SEC, CFTC, and Treasury will jointly issue rulemaking within one year to clarify these distinctions further. Given the current crypto-friendly leadership at these agencies, the industry views this compromise as workable — if not ideal.

"In the end, the banks were able to get more restrictions on rewards, but we protected what matters: the ability for Americans to earn rewards based on real usage of crypto platforms and networks." — Faryar Shirzad, Coinbase Chief Policy Officer

Still, this issue isn't fully closed. Banking trade groups plan to "ramp up outreach" to additional members of Congress in the coming days, signaling the fight may continue.

Two other hurdles remain:

• Developer and DeFi protections — language from the Blockchain Regulatory Certainty Act is still being negotiated
• Ethics provisions — some senators are hardlining on Trump family crypto activity, demanding conflict-of-interest safeguards. The White House has refused to accept language singling out the president.

Despite these challenges, Polymarket odds of the Clarity Act passing have surged from 46% to 66% this week. The target signing date: July 4th.

💼 Coinbase Layoffs & Multi-Billion Dollar VC Raises

Coinbase announced it is laying off 14% of its workforce — a familiar move for the company, which has trimmed staff at the bottom of every cycle (2018, 2022, and now 2026). CEO Brian Armstrong cited a push toward organizational efficiency, including:

• A maximum of five layers from CEO to individual contributor
• No pure managers — everyone must contribute individually

While AI was mentioned as a driver of efficiency, this appears to be more of a cyclical cost-cutting measure than a technology-driven restructuring. Historically, Coinbase layoffs have marked or closely preceded market bottoms.

On the flip side, venture capital is flooding back into crypto. Recent raises include:

• a16z: $2.2 billion
• Haun Ventures: $1 billion
• Dragonfly: $650 million
• Paradigm: $1.5 billion (crypto + AI + robotics)

Combined, nearly $6 billion in fresh capital is now available for deployment into crypto and adjacent sectors. Focus areas include new financial infrastructure, stablecoins, tokenized assets, and the agentic economy — notably absent were mentions of DeFi apps, layer-1 blockchains, or NFT platforms.

💎 Michael Saylor: "I Might Sell Bitcoin"

In a moment that stunned Bitcoin purists, Michael Saylor publicly acknowledged he may sell Bitcoin to pay dividends to preferred shareholders.

"You buy Bitcoin with credit. You let it appreciate and then you sell Bitcoin to pay the dividend. As long as you're issuing credit in excess of the breakeven point, then this business works and grows forever."

This marks a sharp departure from Saylor's legendary "never sell" mantra. The shift is driven by the structure of MicroStrategy's newer products, like STRH (preferred shares), which require yield payments to attract buyers. By opening the door to selective Bitcoin sales, Saylor aims to expand the total addressable market for these instruments — and, paradoxically, buy more Bitcoin as a result.

While the actual amount of Bitcoin sold would be small, the symbolic significance is huge. Saylor is no longer an absolutist — he's an arbitrageur of time preference, offering 11% yields now in exchange for long-term Bitcoin appreciation he expects to exceed 30% annually.

🏛️ Strategic Bitcoin Reserve: Weeks Away

The drumbeat around a US Strategic Bitcoin Reserve is getting louder.

Patrick Wit, the White House Crypto Council executive director, stated at Consensus Miami:

"The Strategic Bitcoin Reserve is coming. An announcement is coming in the next few weeks."

This follows earlier teases from Secretary of Defense Pete Hegseth and Eric Trump, who noted the US government holds approximately 300,000 Bitcoin and won't sell it.

What's likely to be announced? Probably not a Bitcoin purchasing program. Instead, expect:

• Centralized cold storage — a "Fort Knox for crypto" consolidating scattered government holdings
• Audit framework and formal non-sale commitments
• Reserve asset designation for Bitcoin (and possibly other crypto assets), placing it alongside gold and foreign currencies on the Fed balance sheet

Of the government's 328,000 Bitcoin, a significant portion remains tied up in court cases or owed to victims. The actual reserve would likely consist of 150,000–200,000 BTC.

While this isn't as immediately bullish as an active buying program, it represents a massive step in legitimizing Bitcoin as a sovereign asset. Polymarket odds of a US national Bitcoin reserve stand at 33%, up on the week.

⛓️ Ethereum Layer 1 Scaling Is Back

Ethereum's core developers met in Svalbard — yes, the Arctic Circle — to finalize the Glamsterdam hard fork.

Key upgrade: max block space will increase from 60 million gas to 200 million, representing a 7x jump in throughput over 12 months. This puts Ethereum back on track with the 3x-per-year scaling roadmap proposed by researcher Dankrad Feist, targeting 1 gigagas by 2030.

With this upgrade, Ethereum's Layer 1 could handle 80–100 transactions per second — a dramatic improvement that further cements the trend: blockchain fees are disappearing.

"No chain has fees anymore. Bitcoin has no demand. Ethereum is scaling. Solana is going even faster. You only get fees if demand exceeds supply."

This reinforces the thesis that Ethereum's value accrual will increasingly depend on its role as a store of value and monetary asset — not fee revenue alone.

🔐 Arbitrum DAO Faces Legal Attack Over Frozen North Korean Funds

Arbitrum successfully froze 31,000 ETH (roughly $70 million) linked to a North Korean Lazarus Group hack. The funds were set to be redistributed to victims via DeFi United.

Then came the curveball: a US District Court restraining order from the Southern District of New York, filed by plaintiffs with unpaid terrorism judgments against North Korea totaling $877 million. Their lawyers argued the frozen ETH constitutes "North Korean property" and should be subject to their claims.

The Arbitrum Foundation filed an emergency motion to vacate the order, stating:

"A thief does not gain lawful ownership of stolen property simply by taking it."

The legal team behind the challenge is the same firm that previously filed frivolous lawsuits against Compound, Aave, and PoolTogether — cases that were eventually dismissed but drained projects of resources.

The incident highlights the growing liability risks for DAO security councils and multisig signers, who may now face legal pressure from courts despite acting in good faith. It's a reminder that decentralization and regulatory clarity remain urgently needed.

✅ Final Thoughts

Markets are euphoric. AI is driving historic earnings growth. Crypto is riding the wave — but also facing growing pains around regulation, legal challenges, and structural questions about value accrual.

The Clarity Act is closer than ever. The Strategic Bitcoin Reserve is taking shape. Ethereum is scaling its Layer 1 again. And Michael Saylor, of all people, might actually sell some Bitcoin.

We're in uncharted territory — but that's exactly where crypto thrives.

Crypto is risky. You could lose what you put in. But we're headed west. This is the frontier. Not for everyone — but we're glad you're with us on the Bankless journey.