The market was pricing in peace with Iran, but Washingtonians started bickering among themselves. In the same week, the European Central Bank listed AI as a core risk for the banking sector.
1｜Iran Framework Agreement Emerges, Brent Plunges 5% to $98, GOP Divided
Negotiations for a ceasefire in Iran made significant progress over the weekend. Both the US and Iran are close to reaching an agreement: ending the war, reopening the Strait of Hormuz, Iran surrendering its stockpile of highly enriched uranium, and the specific conditions for sanction relief and asset unfreezing will be negotiated within a 60-day window.
Brent crude oil tumbled 5.2% to $98.12 per barrel in response, while WTI dropped to around $92. Goldman Sachs data shows that global oil inventories are being depleted at a record pace of 8.7 million barrels per day, with a total decrease of 250 million barrels from March to April.
The market was pricing in peace, but President Trump’s own allies within the party openly opposed the deal. Republican hawks like Cruz, Wicker, Graham, among others, warned him of an “imminent disastrous mistake,” arguing that the terms of the agreement were too lenient and that three months of war could be “all for naught.” On the Iranian side, it’s the opposite sentiment, with the more generous the conditions, the more they suspect a trap. The White House said the final approval might take several days, and Iran’s Supreme Leader Khamenei still needs to sign off. The greatest risk to peace is not in Tehran but in the internal rift in Washington. [Fortune / Axios / AP / Goldman Sachs / IEA]
2｜SpaceX IPO Set for June, $1.75 Trillion Valuation Anchored to Starship V3
SpaceX is expected to go public in June under the ticker SPCX, targeting a valuation of $1.5 to $2 trillion, with a median of $1.75 trillion. If successful, this would be the largest tech IPO in history. Under a dual-class share structure, Musk retains over 85% of the combined voting power.
Early investors told Fortune that Starship V3 is the infrastructure for all “frontier markets,” such as orbital data centers, Starlink expansion, lunar missions, and more, and its performance data will directly impact the credibility of the S-1 narrative. The V3’s maiden flight on May 22 achieved most objectives, but the booster recovery failed, with “several anomalies” during the flight.
SpaceX is not the only player in space. Rocket Lab, Firefly Aerospace, Intuitive Machines, and a group of other space companies are already listed. The Chinese Shenzhou-23 mission launched on the same day, and the space race is shifting from government monopolies to industry sectors. The pricing logic for the IPO is not in current revenue but in the premium of imagination for the “space infrastructure platform.” [Fortune / The Wall Street Journal / Euronews / Reuters / SpaceX]
3｜European Central Bank Calls Emergency Meeting with Banks: AI Models Now Seen as Banking’s “Core Risk”
The European Central Bank has called for a meeting with bank executives to accelerate the remediation of risk management gaps exposed by AI models. ECB board member Elderson stated that AI is hastening the discovery and exploitation of cybersecurity risks. Pedro Machado from the ECB’s banking supervision department went further to qualify AI as a “core risk” for the banking industry, impacting governance frameworks, business models, and various risk dimensions.
The ECB’s concerns are not theoretical. Studies have shown that reinforcement learning systems have exhibited a coordinated response pattern similar to a bank run in specific scenarios. On the same day, TechCrunch reported on Google also actively “fumbling in real-time” with AI security, while VentureBeat highlighted AI agents causing a new class of production incidents that existing post-mortem analysis templates are entirely unable to categorize. AI risk is shifting from “something we need to discuss” to “something we need to address immediately.” Banks, tech companies, and regulators all acknowledge they are not yet prepared, with only the distinction of who admits it first. [Financial Times / Bloomberg / European Central Bank / TechCrunch / VentureBeat]
4｜Vitalik Announces Ethereum Foundation Will Become a “Smaller Ship,” 8 Researchers to Depart This Year
Vitalik Buterin responds to the exodus of researchers from the Ethereum Foundation. At least 8 senior contributors will exit by 2026, with 5 already departing in May alone. Vitalik stated that the foundation will be “smaller and more opinionated than in previous years, potentially in ways that are hard to understand, but more long-lasting.”
The foundation will reduce ETH sales, aiming for “sustainability over breadth.” He also mentioned that his influence within the foundation would continue to decrease, stating, “This is what I want.” Vitalik redefines the researcher departures as “evidence that the 2025 reorganization is proceeding as planned.” His rationale is that the foundation is actively handing over execution power to client teams and independent organizations, and the departing researchers have not stopped working for Ethereum but have shifted to more suitable vehicles.
Ethereum’s power structure is undergoing a deliberate decentralization, but this decentralization is directed at the development organization itself. For ETH holders, the short-term positive is the foundation reducing sales, while the long-term variable is whether the decentralized development forces can maintain coordination. [The Block / Phemex / CryptoTimes / BeInCrypto]
Also Worth Knowing ↓
China’s Shenzhou 23 launch, first Hong Kong astronaut selected, with one astronaut set to stay on the space station for a year. Dr. Larry Lai, with a Ph.D. in computer forensics, is Hong Kong’s first astronaut to enter space. The one-year mission aims to “explore human adaptability and performance limits.” The launch was moved up from November to May, coinciding with SpaceX’s IPO and the Shenzhou 23 launch, accelerating the pace of the U.S.-China space race. [Al Jazeera / CGTN / The Washington Post]
AI is accelerating the threat of quantum computing to cryptocurrency. Security experts warn AI is shrinking the time window for quantum computers to break current encryption algorithms. Another report on the same day stated that the cryptorail is becoming an AI Agent’s default payment infrastructure. AI is simultaneously threatening cryptocurrency security and becoming its customer. [CoinDesk]
StablR stablecoin hit by a multisig vulnerability attack, resulting in $13.5 million of unbacked tokens being minted. After obtaining one multisig holder’s private key, the attacker replaced the other signers and minted 8.35 million USDR and 4.5 million EURR under a 1-of-3 threshold. EURR dropped to $0.85, USDR dropped to $0.70. Blockaid categorized this as an “access control failure” rather than a code vulnerability, pointing to a human and process issue. [The Block / Blockaid / BeInCrypto]
Ubisoft tests generative AI in Far Cry 7, with insiders saying “it looks like garbage.” The company just reported a record €1.3 billion loss. Using AI to replace content creation during the worst loss period shows a cost-saving motive overtaking innovation. [Tom’s Hardware]
TD Bank launches AI Agent model to expedite mortgage approvals. Canada’s TD Bank has deployed an AI model for automated mortgage and home equity line of credit application processes. The European Central Bank warned banks of AI risks on the same day TD Bank launched AI loan approvals. The divergence in regulatory and implementation speeds is widening. [Finextra]
Xreal believes it has conquered the smart glasses industry and is collaborating with Google to develop the next-generation product. Founder Kevin Xu believes AR glasses have finally reached a tipping point. Google’s choice of Xreal over in-house hardware development signifies a shift in big tech’s AR strategy from in-house to collaborative, indicating that Meta’s Ray-Ban route is not the only solution. [TechCrunch]
Fair Value Pricing: Geopolitical De-escalation, AI Risks, and Market Repricing
The crypto market finds itself at an interesting inflection point where traditional market dynamics are increasingly intersecting with digital asset fundamentals. Several key developments this week suggest we’re witnessing a significant repricing across multiple dimensions – from geopolitical risk to technological adoption and regulatory frameworks.
Geopolitical Risk Reduction: A Mixed Blessing for Crypto
The potential framework agreement between the US and Iran represents a meaningful de-escalation in one of the key geopolitical risk factors that has historically influenced oil markets and, by extension, risk asset pricing. Brent crude’s 5.2% drop to $98.12 per barrel reflects market optimism about reduced supply disruptions.
For crypto markets, this reduction in geopolitical uncertainty typically benefits risk-on assets. However, the internal Republican opposition to the deal creates an asymmetric risk profile. While markets are pricing in peace, the political rift in Washington introduces significant execution risk. This creates a classic “buy the rumor, sell the news” scenario for crypto markets, where the potential failure of the deal could trigger sharper volatility than the initial de-escalation rally.
What’s particularly noteworthy is that the greatest risk to peace now lies not in Tehran but in Washington – a dynamic that markets have historically underpriced. Crypto markets, which have increasingly correlated with traditional risk assets, should prepare for potential volatility if the deal collapses despite market optimism.
The SpaceX IPO: A Liquidity Event or Sentiment Catalyst?
SpaceX’s planned June IPO targeting a $1.75 trillion valuation represents a potential watershed moment for both traditional markets and the broader tech ecosystem. As the largest tech IPO in history, it will undoubtedly divert significant institutional attention and capital.
For crypto markets, this creates a dual dynamic:
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Liquidity Competition: A $1.75-2 trillion IPO will absorb substantial institutional liquidity that might otherwise have flowed into digital assets. We’ve seen this pattern with other large IPOs, where crypto markets experience temporary headwinds as capital reallocates to perceived safer, more traditional growth opportunities.
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Space Sector Validation: However, the IPO also validates the space economy narrative, which directly benefits space-themed crypto projects. The timing with China’s Shenzhou-23 mission underscores the intensifying US-China space race, creating a tailwind for projects focused on space infrastructure, data centers, and orbital technologies.
The Starship V3’s mixed performance (successful maiden flight but booster recovery failure) introduces valuation uncertainty. Unlike traditional IPOs priced on current fundamentals, SpaceX’s valuation is anchored to future “frontier markets” – a pricing logic that more closely resembles speculative crypto valuations. This could create interesting parallels as markets assess risk-reward profiles for high-growth, capital-intensive ventures.
AI as a “Core Risk”: Regulatory Tailwinds for Crypto Infrastructure?
The European Central Bank’s designation of AI as a “core risk” for banking represents a paradigm shift in regulatory thinking. The ECB’s concerns about reinforcement learning systems exhibiting bank-run-like coordinated responses are particularly relevant for DeFi protocols, which already face systemic risk challenges.
This development creates several implications for crypto markets:
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Regulatory Arbitrage: As traditional banks face increasing regulatory scrutiny around AI adoption, blockchain-based AI solutions may present a more favorable regulatory environment. We could see increased institutional interest in decentralized AI governance protocols.
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Quantum Threat Acceleration: The ECB’s acknowledgment of AI-related cybersecurity risks coincides with warnings about AI accelerating quantum computing threats to cryptocurrency encryption. This creates an urgent narrative for post-quantum cryptographic solutions, potentially driving investment in projects developing quantum-resistant blockchain infrastructure.
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AI Agent Payment Infrastructure: The simultaneous emergence of AI agents adopting crypto as payment infrastructure presents a fascinating dichotomy – AI simultaneously threatens crypto security while becoming one of its most promising use cases. This duality suggests we’re in the early innings of a symbiotic relationship rather than a zero-sum dynamic.
Ethereum’s Deliberate Decentralization: A Positive Long-Term Play
Vitalik Buterin’s announcement regarding the Ethereum Foundation’s downsizing and reduced ETH sales represents a maturation narrative for the ecosystem that is likely underappreciated in the short term.
The departure of 8 senior researchers by 2026, framed as part of a planned reorganization rather than a crisis, signals a deliberate shift toward a more decentralized development structure. This has several implications:
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Reduced Selling Pressure: The Foundation’s commitment to “sustainability over breadth” and reduced ETH sales provides immediate price support by removing a known source of selling pressure.
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Ecosystem Maturation: The handover of execution power to client teams and independent organizations mirrors the successful decentralization path of other major protocols. This could ultimately strengthen Ethereum’s resilience and innovation capacity.
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Governance Evolution: Vitalik’s decreasing influence within the Foundation represents a rare case of a founder intentionally reducing control – a move that should enhance long-term credibility with institutional investors concerned about centralization risks.
For ETH holders, this represents a favorable short-term dynamic (reduced selling) with potentially positive long-term implications (more robust, decentralized development ecosystem).
Market Implications and Strategic Considerations
The confluence of these developments suggests we’re entering a period of significant market repricing across multiple dimensions:
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Risk-On Moderation: While geopolitical de-escalation generally benefits risk assets, the uncertainty around the Iran deal and large traditional IPOs may temper the typical risk-on behavior seen in previous market cycles.
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Sector Rotation: We may see a rotation from pure speculative narratives toward projects with clearer utility narratives, particularly those addressing real-world challenges identified by regulators (AI governance, quantum security, etc.).
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Institutional Pathways: The SpaceX IPO could serve as a template for how institutional investors approach high-growth, high-risk ventures – potentially influencing how they evaluate similar crypto projects.
For experienced crypto investors, the current environment presents a mix of challenges and opportunities:
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Challenges: Increased regulatory scrutiny around AI, potential liquidity diversion from large traditional IPOs, and persistent stablecoin security vulnerabilities.
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Opportunities: Reduced geopolitical risk premia, Ethereum’s favorable supply-demand dynamics, the validation of space economy narratives, and the emergence of AI-crypto symbiotic use cases.
The key insight is that we’re witnessing the early stages of mainstream financial markets adopting frameworks that have been central to crypto valuation for years – fair value pricing based on future potential rather than current fundamentals. As traditional markets become more comfortable with this approach, the valuation gap between crypto and traditional tech assets may narrow – creating both opportunities and challenges for digital asset investors.