BTC Vol Drops Further

Daily Updates:

• Yesterday’s Producer Price Index (PPI) report recorded a 0.5% decrease in final demand PPI for April – significantly lower than the forecasted 0.2% increase and the largest decline since March 2020. On a 12-month basis, the index for final demand rose 2.4%. 
• The Producer Price Index (PPI) measures the average change over time in the selling prices received by domestic producers for their output. PPI is taken as a leading indicator for consumer price inflation – therefore a negative value could indicate cooling consumer prices. However, it might also be an indication that some producers may have temporarily taken a cut to their margins and absorbed the impact from Trump’s onslaught of tariffs in April – those costs could eventually be passed onto consumers, feeding into consumer price inflation with a lag. 

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• In a separate data release, US retail sales for April saw a marked deceleration, as retail purchases, unadjusted for inflation, increased only 0.1%, from an increase of 1.7% in March. The flat growth in April followed the biggest monthly jump in more than two years in March — as consumers rushed to beat Trump’s tariffs.

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• The two data releases preceded a rally in US treasuries, which saw treasury yields across the curve fall lower. The 2Y treasury yield led the move, sliding 8bps to 3.97%, and the 10Y yield dropped 5bps, falling back below 4.5%. Overnight interest rate swaps are now pricing in 50bps of rate cuts for 2025. 

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• The risk pendulum swung in favour of continued risk-on sentiment yesterday. After a flat closing on Wednesday, the S&P 500 rose 0.4%. BTC has also steadily moved up from $101K, briefly approaching the top of a range we have seen it trade within over the past week ($105K). ETH also briefly touched $2.6K, before paring back some of those gains earlier in the day. 
• The continued leak in BTC short-tenor volatility that we highlighted in our April volatility review report has resulted in front-end volatility dropping to its lowest levels since late June 2024 – currently only 33% for the 7-day tenor.  
• Skew remains tilted towards OTM calls for both BTC and ETH at all tenors and both assets maintain a positive futures curve. 

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• The low volatility expectations appear to be in contrast to the elevated uncertainty that Chair Jerome Powell once again made clear during a speech yesterday. 
• Powell said that the pre-2010 era of near-zero interest rates may not return anytime soon, citing that “higher real rates reflect the possibility that inflation could be more volatile going forward than in the inter-crisis period of the 2010s.” He added that “we may be entering a period of more frequent, and potentially more persistent, supply shocks, a difficult challenge for the economy and for central banks.”
• Due to the changing economic circumstances, Powell mentioned that Fed policymakers are considering changes to key parts of their monetary policy framework, which was last reviewed in 2020 – including how to reconsider shortfalls in their dual mandate of maximising employment and inflation at 2%.

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• Coinbase has suffered a data breach caused by cybercriminals bribing overseas support agents to release data. Allegedly, the company has known since January but delayed disclosure.

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• The Ethereum Foundation has launched the “Trillion Dollar Security Initiative” to strengthen legacy system vulnerabilities and enhance developer support. The goal is to reinforce Ethereum’s security to increase capability of safely managing trillions of dollars in on-chain assets.

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• BlackRock’s $3B tokenized Treasury fund, BUIDL, has completed its debut in the DeFi world by collaborating with Euler on the Avalanche. 
• An ERC-20 token named sBUIDL has been introduced using Securitize’s sToken framework – a tokenization platform that enables the process of issuing and overseeing compliant digital securities. 
• sBUIDL is a composable token that can be fully exchanged for BUIDL.
  
  
• DDC Enterprise Ltd., a culinary and ready meal manufacturer, has announced a new Bitcoin acquisition strategy as part of its long-term strategy, to diversify the firm’s treasury holdings. 
• The company plans to acquire 100 BTC immediately, with aims to expand to 500 BTC within six months and targeting a 5,000 BTC reserve over the next 36 months.

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