BTC Climbed to Nearly $85K, Its Highest Level Since January

BTC rallied more than 6% on Friday and now trades near $85K, its highest level since January, even as 10-year Treasury yields hit 5% and markets price a 53% chance of another Fed hike. Fed's Kashkari and Schmid backed last week's hike, warning inflation has spread well beyond the oil shock, while the Bank of Japan lifted rates to 1.25% and a reported 'rate check' helped the yen pare its losses. In crypto, ZetaChain holders voted to shut down its Layer 1 and move ZETA to Solana, and Visa is closing a loophole that let memecoin card purchases be coded as digital media.

Crypto

Derivatives

DeFi

Macro

In Today's Note

Minneapolis Fed President Neel Kashkari and Kansas City Fed President Jeff Schmid both backed last week's hike, saying US price pressures have spread beyond the oil shock into services and a broad range of goods. Markets now price a 53% chance of another hike at the Fed's next meeting.
ZetaChain token holders approved a proposal to shut down the project's Layer 1 blockchain and move ZETA to Solana, with 99.4% support on 58% turnout, as the team refocuses on its AI app Anuma. A second governance vote is still required before the migration can go ahead.

Market Snapshot: Overnight Moves

Macro & Markets

Risk assets ended last week positively with BTC rallying more than 6% on Friday to top $81K and now trading near $85K, while the S&P 500 rose 0.17% largely due to a rally in chipmakers as the Philadelphia Semiconductor Sector index rose close to 3%.
Meanwhile, after a temporary easing in the US Treasury rout, 10-year yields hit 5% as markets price a 53% probability of another hike in the Fed’s next meeting and Brent crude traded above $100 a barrel at the end of last week (though oil prices have since fallen below $100 a barrel in line with the rally in risk-on assets).

Last week FOMC participants voted unanimously to raise interest rates in the US for the first time since the summer of 2023 in a bid to curb domestic price pressures.
Following the decision, speaking in an interview on Fox News, Minneapolis Fed President Neel Kashkari claimed that inflation still remains too high in the US, with price pressures having broadened beyond the oil-price shock from the Middle East war.
Kashkari said, “The inflation that the American people are feeling every day is much beyond just oil prices, it’s in all aspects of the economy”, naming inflationary pressures in the service sector as an example.
Kashkari was one of the three policymakers that had favoured a hike as early as the July meeting where he dissented against the decision to hold rates steady, back then he had warned that the typical Fed response would be to look through a supply shock, however a series of consecutive supply shocks meant there was a risk that inflation could become entrenched in the economy, thus requiring more aggressive action from the Fed.
Optimistically, Kashkari claimed, “My hope is, as some of those conflicts go to the background, that the growth can really take over and hopefully bring inflation down. Hopefully disinflation can take over, which will make the Fed’s job a lot easier.”

His colleague Jeff Schmid, President of the Kansas City Fed, also said that he supported last week’s decision.
Mirroring comments from Kashkari, Schmid claimed that core inflation, which excludes energy, has “been running hot” and that a “broad range of goods and services” have also seen price growth inconsistent with the 2% inflation goal.
“The Fed has work to do on inflation and this week’s action was a step in that direction” Schmid said. He added that, “Higher oil prices have been an important driver of elevated inflation, but it is important to acknowledge that our inflation problem is not just about energy.”

The Bank of Japan also raised its benchmark interest rate by a quarter percentage point to 1.25% on Friday with Governor Kazuo Ueda stating that with price trends close to the bank’s 2% target, policymakers need to ensure inflation doesn’t overshoot.
“It has become important to stabilise the rate of price increases at a level of around 2%. In that sense, I believe the phase of policy has shifted to a new stage” he said in the press conference that followed the decision. Ueda also claimed that he wouldn’t rule out a back-to-back hike in October or a move of bigger magnitude at some point, “We won’t rule out any measures”.
Despite the rate increase however, the yen weakened after the decision and two board members, Toichiro Asada and Ayano Sato, both voted against the decision to hike.

Later in the day on Friday, the yen began to pare back its decline after the Nikkei newspaper reported that the Bank of Japan inquired with market participants about exchange-rate levels (a so-called ‘rate check’), a move that is seen by markets as a precursor to official intervention.
The currency had pared its losses down to 0.5% after losing as much as 1.3% earlier in the session.

Looking to the week ahead, the main event will be President Trump’s talks with Chinese President Xi Jinping, where both leaders are expected to discuss crucial issues including tariffs and AI controls.
A number of Fed speakers throughout the week will also provide investors with further insights into how policymakers are viewing the US economy currently.
Chicago Fed President Austan Goolsbee will discuss monetary policy in an event in London on Monday, followed by the NY Fed President John Williams on Tuesday in a keynote speech at a Treasury market conference.
Other Fed officials scheduled to speak during the week include Philip Jefferson, Tom Barkin, Michael Barr, Beth Hammack and Anna Paulson.

DeFi / Web3 / Altcoins / Crypto

ZetaChain token holders have approved a proposal to shut down the project’s Layer 1 blockchain and migrate ZETA to Solana.
Proposal 68 passed with 99.4% support, with 58% participation, above the 40% quorum requirement.
The project originally launched as a Cosmos SDK-based interoperability-focused Layer 1, but its developers now say maintaining a standalone blockchain is no longer necessary for their current direction.
Instead, the team plans to focus on Anuma, its private AI application, and move both the app and ZETA ecosystem to Solana.
Anuma launched in February and, according to the project, has more than 300,000 users and has processed around 1M requests across 35 AI models.
ZETA holders can lock tokens to receive credits for using Anuma’s AI services.
The team also cited the operational and security burden of maintaining a Cosmos SDK chain, including the need to coordinate software patches across independent validators.
The migration is not yet final, however, as another governance vote is still required before the shutdown and move to Solana can proceed.

Polymarket reportedly faced an attempted fraud scheme involving at least $10M in stolen debit card deposits on its U.S. platform earlier this year.
According to The Wall Street Journal, fraudsters used stolen cards to deposit funds, place bets and then tried to withdraw proceeds to different cards or accounts they controlled.
At the peak of the attack, more than 80% of deposits handled by Polymarket’s payment processor were reportedly being rejected as fraudulent.
The report said CEO Shayne Coplan urged employees to prioritize growth despite compliance concerns, though Polymarket said it remains committed to market integrity and regulatory cooperation.
During the incident, Polymarket also removed a safeguard requiring withdrawals to return to the same payment source used for deposits, a control commonly used to reduce money-laundering and stolen-card risks.
The company later introduced tighter controls, including limits on how many debit cards users could link to their accounts, and fraud rates reportedly returned to normal levels by May.
Several senior U.S. compliance and regulatory executives also left the company during the period.
A separate internal investigation by Sullivan & Cromwell concluded that Polymarket had complied with applicable regulations, according to the Journal.
The report also said a separate July attack compromised nearly 500 user accounts using stolen personal information.

Visa is moving to close a payments loophole that allowed some memecoin purchases to be processed as “digital media” rather than crypto transactions.
The issue centered on Crossmint, which powers credit card purchases of memecoins on Fomo and Robinhood Wallet, and its payment processor Checkout.com.
According to the report, those purchases were being classified under merchant category code 5815, typically used for digital media such as streaming content or audiobooks.
Because the transactions were not flagged as crypto purchases, users could potentially earn ordinary credit card rewards or cash back that might otherwise be restricted.
Visa has reportedly told processors that the category is not appropriate for memecoin purchases and has given them a grace period expected to end next week.
After that, the transactions would need to be processed as normal cryptocurrency purchases and become subject to Visa’s crypto-related rules and restrictions.
Crossmint said its procedures have not changed and that it remains in good standing with Visa, Mastercard and its other payment partners, while adding that it would update its processes if network guidance changes.
Mastercard has not publicly said whether it plans to adopt similar restrictions.

Grayscale’s Zcash ETF (ZCSH) is preparing for a 3-for-1 share split less than a month after its NYSE launch.
Shareholders of record at the Sept. 28 market close will receive two additional shares for every share held, with split-adjusted trading beginning Sept. 30.
ZCSH has attracted more than $233M in cumulative inflows since launching on Aug. 25.
The fund had nearly $890M in net assets and more than $11B in cumulative trading volume as of Sept. 17.
ZEC also rallied sharply, reaching as high as $1,521 and setting what the article describes as a new effective all-time high.
The rally has driven more mining activity, with Zcash’s solrate, the network’s mining power, similar to hashrate, rising nearly 28% from late August to just under 32 GSol/s.

This Week's Calendar

This week's macro and crypto calendar, part 1.

This week's macro and crypto calendar, part 2.

Charts of the Day

Figure 1. Block Scholes BTC Risk-Appetite Index (white, left-hand axis) and BTC spot price (orange, right-hand axis). Source: Deribit, Block Scholes.

Figure 2. Block Scholes ETH Risk-Appetite Index (white, left-hand axis) and ETH spot price (purple, right-hand axis). Source: Deribit, Block Scholes.

Figure 3. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

Figure 4. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes.

Figure 5. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

Figure 6. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes.

Block Scholes is an FCA-regulated institutional crypto derivatives analytics platform. Live data, IV surfaces, and backtesting available via blockscholes.com.