Powell Favours Patience, BTC Favours $100K

Daily Updates:

• The Federal Reserve delivered a third consecutive interest rate pause yesterday evening, opting to maintain the target for its federal funds rate at 4.25-4.5% – a move almost entirely priced in by markets ahead of time. 
• Chair Powell spent his press conference reiterating and confirming that he is in no hurry to adjust interest rates, given that “the downside risks [to the economy] have increased, risks of higher unemployment and higher inflation have risen”. Powell warned however that those risks “haven’t materialised yet” and currently inflation is “kind of moving sideways at a fairly low level”. 

• Almost every response to questions asked by journalists involved some iteration of the wait and see approach: 

“Policy rate is in a good place to stay”

“We don’t feel like we need to be in a hurry”

“Right thing to do is to await further clarity”

“The appropriate thing is for us to wait and see” 

“We can afford to be patient as things unfold, there’s no cost”

• Chair Powell emphasised that “if you look through the distortions in Q1 GDP”, then the US economy is still “growing at a solid pace, labour market appears to be solid, inflation is running just a bit above 2%”. 

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• He also made it clear that while the Fed “may have a potential situation” where it faces a tradeoff between the two sides of its dual mandate, for now that tradeoff has not yet “materialised” and it’s “really not in the data yet”. 
• When asked about the slew of weak consumer sentiment releases, Powell defended the Fed’s patient approach by referring to a period during the Covid pandemic where “the link between sentiment data and consumer spending” was weak, with “very downbeat surveys but people were going out spending money”. 
• For now, according to Powell, while “people are feeling stress and concern”, the “unemployment [rate] hasn’t gone up, job creation is fine, wages are in good shape, people are not getting laid off in high levels … The economy itself is still in solid shape”. 

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• US risk-on equities, as measured by the S&P 500, ended the session yesterday 0.43% higher, breaking their two-day loss streak, following news of a potential deescalation in the US-China tariff standoff and by reports that the new administration will rescind some Biden-era AI chip curbs after facing strong backlash from tech companies. 

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• BTC has rallied nearly 3% over the past 24 hours, now at the doorstep of the coveted $100K mark – a level it last traded at in late January. Options markets yesterday however were assigning less than a 10% chance that BTC would cross that $100K threshold today. We also conducted a poll within our Telegram community, where members were split 50-50 between assigning a 10% vs a more than 50% probability that BTC would hit $100K. 
• Part of that move up was due to an early-morning rally during the Asian equities market open, following a Truth Social post from President Trump that a “major trade deal” has been reached between the US and one of its trade partners. 

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• ETH has followed BTC up, trading back above $1.9K, but remains less bullish than BTC across measures of derivatives market sentiment: funding rates have barely registered the move and futures yields have increased their underperformance.
• However, while short-tenor ETH volatility smiles have not followed the same sharp skew towards calls, longer-dated smiles retain a bullish outlook.

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• Arizona has officially enacted HB 2749, establishing the state’s first crypto reserve. While the law doesn’t permit direct investment in cryptocurrencies, it allows the state to accept digital assets as payment for certain obligations.

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• The Office of the Comptroller of the Currency (OCC) has issued Interpretive Letter 1184, reaffirming that national banks and federal savings associations are permitted to provide cryptocurrency custody and execution services on behalf of customers. 
• This includes the authority to buy and sell assets held in custody at the customer’s directions and to outsource these services to third parties, provided appropriate risk management practices are in place.

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• Robinhood Markets Inc is reportedly developing a blockchain-based platform to facilitate trading of U.S. assets in Europe. This move aims to leverage blockchain technology to enhance trading efficiency in transparency for European investors.

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