Kicking The Can Down The Road

Daily Updates:

• Officials also revised their estimates on growth, unemployment and inflation. The SEP shows the median participant now projects GDP to rise 1.4% this year, slower than the 1.7% expected in March, and slightly below the OECD’s recent June projection of 1.6% growth in 2025.
• The median projection for total PCE inflation is 3% this year, three tenths higher than that projected in March. Even by 2027, inflation is projected to fall short of the 2% target, coming in at 2.1%.

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• Chair Powell (as he has often done in recent meetings) laboured the logic behind the FOMC’s wait-and-see approach:

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“You can see perhaps a very, very slow continued cooling. But nothing that’s troubling at this time” – in response to the labour market.

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“And we think our policy stance is in a good place where we’re well-positioned” – x5

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“Because the economy is still solid, we can take the time to actually see what’s going to happen”

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“And the economy seems to be in solid shape. So the labour market’s not crying out for a rate cut”

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• When questioned on whether the data today indicates that there should be a rate cut, Chair Powell responded that despite “three months of favourable inflation readings”, “monetary policy has to be forward-looking. That is elementary”. Since “every forecaster you can name who is a professional forecaster” is “forecasting a meaningful increase in inflation in coming months from tariffs” it means that the FOMC can stay where they are and “just learn more” about tariffs – “in particular we feel like we are going to learn a great deal more in the summer on tariffs”.

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• For the Fed, “the cost of the tariff has to be paid and some of it will fall on the end consumer. We know that. That’s what businesses say. That’s what the data say from past evidence” and therefore even if “tariff uncertainty peaked in April” and “has come down” since, the Fed wants to avoid “making judgements prematurely”.
• Finally, Jerome Powell said there were signs of “price increases in some relevant categories like personal computers … attributable to tariff increases”.

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• US equities gave up their rally yesterday ending the day almost unchanged following Powell’s comments. The two-year treasury yield, most sensitive to Fed policy changes, erased a decline that saw it fall to 3.89% and it is now trading at 3.93%.  
• Geopolitical tensions also continue to remain high – when asked whether the US would intervene militarily in the Middle East, President Trump said “I may do it. I may not do it” in reference to bombing Iran.

• Bitcoin and Ether have both traded sideways throughout yesterday between $103K and $105K for BTC and around $2500 for ETH. After spending most of the middle of the month inverted, ETH’s term structure inversion has largely dissipated into a flat shape, with both 7-day options and 180-day options both trading with an IV of 66%.
• BTC at-the-money implied volatility has once more reached 35% – we’ve highlighted the importance of that level as a floor for ATM IV of nearly two years. Despite ETH implied volatility dropping and flattening its volatility term structure, the ETH/ BTC ratio of ATM IV for 7 day options continues to be close to 2 given the drop in front-end BTC volatility.
• Perpetual swap funding rates were unaltered by the events of yesterday for both assets and continue to be close to 0% for both.
• The convergence in 1-month futures yields which we commented on recently, has now widened, largely due to a decline in BTC spot yields from 5% down to 3.3%, which is now below the 4.5% yield on the equivalent ETH tenor.

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• BTC ETFs recorded an 8th consecutive day of positive net inflows yesterday, increasing BTC holdings by $388.3M and bringing June’s net figure to $2.3B.
• In contrast, accumulation of ETH has slowed somewhat from its fast pace at the beginning of June, having recorded positive inflows in 23 of the last 24 trading days and adding $1.4B of ETH in that period.

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• Circle’s (CRCL) rally continues as the GENIUS Stablecoin act passed the senate yesterday, closing up 33.82% in one day.

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• Solana accumulation firm, Sol Strategies (CNSX: HODL,) currently listed on the Canadian Securities Exchange, has applied to the SEC to go public on US exchange Nasdaq with the ticker STKE.
• They currently hold over 420,000 SOL tokens (approximately $61.32M)

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• Lion Group Holding Ltd. (Nasdaq: LGHL) has announced the creation of a treasury strategy including Hyperliquid (HYPE), Solana (SOL) and Sui (SUI) through a $600M funding from ATW Partners.

This Week's Calendar:

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Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

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Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

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Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

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Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

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