Morgan Stanley Pilots E*Trade Crypto Trading

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In Today's Note

• Risk assets rally: Bitcoin rose to $82.8K as US equities reached fresh record highs, while spot BTC ETFs extended their inflow streak.
• Oil falls on US-Iran deal hopes: Crude briefly dropped below $100 as markets priced rising hopes of a ceasefire and a reopening of the Hormuz Strait.
• Fed inflation risks and crypto market structure: Fed speakers flagged renewed inflation concerns, while regulated digital asset infrastructure continued to expand.
  

Market Snapshot: Overnight Moves

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Macro & Markets

• Bitcoin rallied to as much as $82,800 while traders once again lifted US equities to yet another record high. 
• The S&P 500 finished the mid-week trading session up 1.46% closing at 7,365.12 points and the Nasdaq-100 surged over 2%, ending at 28,599.17 points.
• U.S. spot Bitcoin exchange-traded funds recorded their fifth consecutive day of net inflows on Wednesday, bringing total inflows over the period to nearly $1.7B.
• The latest data also puts U.S. spot Bitcoin ETFs on track to record their sixth consecutive week of net inflows. If confirmed, this would mark the longest weekly inflow streak for the products since July 2025.

• The rally in risk sentiment was accompanied by a sharp drop in oil prices which briefly fell below $100 per barrel on hopes that a deal between the US and Iran was imminent. 
• The US sent Iran a one-page 14-point memorandum of understanding (MOU) to end the conflict that is approaching its 10th week, with US officials stating they expect a response from Tehran within 24-48 hours. The memorandum will also set a framework for more detailed negotiations regarding Iran’s nuclear weapons. 
• According to Axios, the MOU would declare an end to the war in the region and start a 30-day period of negotiations that will involve Iran committing to a moratorium on nuclear enrichment, a full reopening of the Hormuz Strait and a lifting of US sanctions on Iran. 

• On Truth Social, Trump wrote “Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective Blockade will allow the Hormuz Strait to be OPEN TO ALL, including Iran.”
• However, the same post threatened a restart of the bombing campaign “at a much higher level and intensity” should Iran reject the proposal.

• Speaking to reporters at the Oval Office after that post, Trump said “Iran cannot have a nuclear weapon, and they won’t, and they’ve agreed to that, among other things”. He added “We’ve had very good talks, and it’s very possible that we’ll make a deal.”

• Iranian foreign ministry spokesman Esmaeil Baqaei told local media that the "US plan and proposal are still under review", and that Iranian officials would give their response via Pakistan. 
• However, Iranian parliament speaker and one of the lead negotiators for Tehran, Mohammad Bagher Ghalibaf, warned that the US "is seeking, through a naval blockade, economic pressure and media manipulation, to destroy the country's cohesion in order to force us to surrender".

• Two Fed speakers gave their views on the US economy and the path for monetary policy yesterday. 
• Chicago Fed President Austan Goolsbee cited conversations with business executives after the Middle East conflict began that a short rise in oil prices would not be a problem, but "if this was going to be month after month of really extended high oil ‌prices, they would start to feel pretty intense pressures on the supply chain”, similar to what drove inflation higher during the Covid period. 
• Goolsbee said "You're starting to see some of these problems developing”. He added that while there was an initial concern the war would hurt US job growth and demand while also leading to higher prices, "It has not yet been a stagflationary-direction shock, it has just been an inflationary shock. And the longer that continues, the more nervous that makes me."

• Separately, St. Louis Fed President Alberto Musalem said the risks to monetary policy have shifted towards higher inflation, which could require the Fed to stay on hold "for some time” or perhaps even move rates higher.
• At a Bankers Association event, he said "We have risks both on the employment side and on the inflation side. In my understanding, risks have been shifting towards ... the inflation side". 
  

DeFi & TradFi

• Kraken has launched CFTC-regulated crypto spot margin trading for U.S. retail users, marking a notable expansion of regulated trading access in the market.
• The offering allows eligible users to trade with up to 10x leverage, using their crypto holdings as collateral without needing to sell the assets outright.
• Kraken said the product is designed to bring margin trading activity into a regulated environment, after limited domestic availability had pushed many U.S. retail traders toward offshore platforms.

• TrustedVolumes, a liquidity provider and market maker integrated with 1inch, a decentralised exchange aggregation protocol, has suffered an ongoing exploit targeting its Ethereum-based resolver contract, with losses initially estimated at $6.7M.
• According to Blockaid, a blockchain security and transaction monitoring firm, the attacker exploited a vulnerability in a TrustedVolumes-controlled custom RFQ (request-for-quote) swap proxy, draining assets including 1,291 WETH, 206K USDT, 16.9 WBTC, and 1.26M USDC.
• Blockaid attributed the exploit to the same entity behind the March 2025 1inch Fusion V1 attack, while 1inch stated that its core infrastructure and user funds were not impacted by the incident.

• American Bitcoin, a Bitcoin mining and treasury company co-founded by Eric Trump, reported an $81.8M net loss in Q1, primarily driven by a $117.2M mark-to-market loss on digital assets as BTC declined 22% during the quarter.
• Despite lower mining revenue ($62.1M vs. $78.3M in Q4), the firm achieved record production of 817 BTC, acquired an additional 803 BTC for treasury reserves, and increased total holdings to 7,021 BTC while improving mining costs by 23% to $36,200 per BTC.
• The company expanded its mining infrastructure, with management highlighting gross mining margins above 50% and a policy of not selling mined BTC.

• Ondo Finance, a tokenisation platform for real-world assets, alongside Kinexys by J.P. Morgan, Mastercard, and Ripple, completed a pilot transaction linking the XRP Ledger with traditional interbank settlement infrastructure to process cross-border settlement of tokenized US Treasuries.
• The workflow involved redemption of Ripple-held OUSG (Ondo Short-Term US Government Treasuries Fund) on the XRP Ledger, routing settlement instructions through Mastercard’s Multi-Token Network, and final USD settlement via Kinexys by J.P. Morgan into Ripple’s Singapore banking account.
• The pilot demonstrated near real-time settlement of tokenized securities across public blockchain and banking rails outside standard banking hours.

• Morgan Stanley has begun a pilot rollout of spot cryptocurrency trading on its E*Trade retail brokerage platform, according to Bloomberg.
• The pilot introduces a 50-basis-point transaction fee on the dollar value of each crypto trade.
• The service is currently live for a limited group of users, with broader access for E*Trade’s 8.6M clients expected later this year.

• BNY is expanding its digital asset custody business into the United Arab Emirates through new partnerships with Finstreet and ADI Foundation.
• The bank said the collaboration will focus on delivering institutional-grade crypto custody services within the Abu Dhabi Global Market.
• The initial offering will support custody for Bitcoin and Ether on behalf of Finstreet’s clients.
• BNY, Finstreet and ADI Foundation also plan to explore further integration with ADI Foundation’s blockchain infrastructure.
  

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