Priced for a Hike

In Today's Note

• Markets now price an 89% chance that the Fed raises rates on Wednesday, up from 70% on Thursday, after August core CPI rose 0.3% against a 0.2% forecast. Two-year Treasury yields rose as much as eight basis points to 4.66%, their highest since 2024.
• Metaplanet, the Tokyo-listed bitcoin treasury company, cut the shares tied to its Series 10 executive stock options by 41%, to about 188.2M, after shareholders criticised the dilution. Its CEO says the change removes more than $220M of warrant value.

Market Snapshot: Overnight Moves

Macro & Markets

• Despite markets now pricing an 89% chance of a rate hike in this week’s FOMC meeting (up from 70% on Thursday), following a slightly higher than expected core CPI print, risk-assets showed resilience in Friday’s trading session.
• The S&P 500 rose 0.86% after four consecutive days of losses, while BTC briefly rose towards $80K before spending the weekend and Monday morning consolidating around $77K.
• A decline in oil prices helped risk assets on Friday as Brent crude fell from a four-month high, though it jumped at the open yesterday night back to $107 a barrel after Saudi Arabia closed its East-West oil pipeline as a precaution following Iraqi drone attacks.

• The BLS’s CPI report showed little progress towards the Fed’s 2% inflation target as core CPI rose 0.3% month-over-month, above the median estimate of 0.2%. That meant the annual core CPI figure advanced 2.4%.
• Headline inflation increased 0.4% in August after edging up 0.1% in July, with inflation rising 3.4% in the twelve months through August. Energy prices also rose 2.1% on the month.

• The report also showed signs of the ongoing pressure the AI data center buildout is having on US inflation. Computer software and accessories prices rose by a record 25.4% year-on-year, while the price of computers, peripherals and smart home assistants advanced a near-record 8.4%.
• Interestingly, there was an odd culprit behind the higher-than-expected core inflation number: a record 5.9% jump in wireless telephone services prices, a gauge that largely reflects prepaid and monthly plans offered by cellular carriers, which added an estimated 10bps to the core reading (bringing it from 0.2% to 0.3%).

• Yields on two-year notes, most sensitive to Fed policy, rose as much as eight basis points to 4.66%, their highest level since 2024, while 10Y yields further down the curve fell around four basis points to 4.92%. Together the moves flattened the 2s10s yield curve, with the outperformance of longer-dated bonds a sign that traders expect the Fed to tighten policy and bring inflation down.

• The week ahead will be a major one for central banks and monetary policy. The Fed meets on Wednesday and will be followed by an expected pause from the Bank of England on Thursday and a widely widely predicted rate hike from the Bank of Japan at the end of the week.

DeFi / Web3 / Altcoins / Crypto

• Metaplanet, a Tokyo-listed bitcoin treasury company, cut the potential shares tied to its Series 10 executive stock acquisition rights by 41%, from about 319.5M to 188.2M shares, after shareholder criticism over dilution.
• The company also reduced the conversion ratio from 696 shares to 410 shares per option right and pushed exercise dates into 2029, 2030 and 2031, with CEO Simon Gerovich saying the changes remove more than $220M of warrant value and increase bitcoin per diluted share by about 8.8%.
• Metaplanet also scrapped a planned employee warrant program, opting to cancel those rights and design a separate compensation scheme, as its shares remain down more than 38% year to date.

• A petition on South Korea’s National Assembly platform calling for another delay to the country’s crypto tax has crossed the 50,000-signature threshold, requiring the relevant parliamentary committee to formally review the proposal; the petition seeks a two-year postponement.
• Under current law, South Korea’s crypto tax is scheduled to begin on Jan. 1, 2027, imposing a 22% tax, including local taxes, on annual gains from trading or lending virtual assets above ₩2.5M.
• Separately, opposition lawmakers have introduced bills that would push implementation back further, including proposals to delay the start to 2029 or 2030, citing incomplete tax infrastructure, investor-protection rules and concerns over tax fairness.

• Revolut, a UK-based fintech and digital banking company, disclosed customer information after an unauthorized third party used an email account from a legitimate government agency domain to submit fraudulent requests for records, although Revolut said its systems and customer funds were not compromised.
• Potentially exposed information included names, contact details, identity documents, verification selfies, bank account statements, IBANs, withdrawal records and complete transaction histories, including Bitcoin transactions, with Revolut saying only a limited number of customers were affected.
• Attackers have now begun publishing some of the stolen customer IDs and selfies online and are threatening additional daily leaks unless Revolut pays, escalating the incident from an unauthorized disclosure into an active extortion attempt.

• The UK Financial Conduct Authority (FCA) is considering a dedicated framework for tokenized gold (digital tokens representing rights to physical bullion) that could exempt qualifying products from rules governing collective investment schemes and alternative investment funds.
• The proposal could make gold stored in London’s bullion vaults easier to divide, transfer and use as collateral, allowing financial institutions to mobilize physical gold more efficiently for digital trading, lending and other transactions.
• The initiative is part of the UK’s broader effort to expand tokenized financial markets and unlock traditionally difficult-to-use assets as collateral, but the FCA is still evaluating the regulatory treatment and no final rules have been adopted.

• Ethena Labs, the developer behind USDe, a dollar-pegged crypto asset that functions similarly to a stablecoin but maintains its $1 value through crypto backing and derivatives hedging rather than traditional cash reserves, and rewards-bearing staked version, sUSDe token, has launched both assets on the TRON blockchain, with users able to bridge, hold and transfer them through Stargate Finance.
• Support is expected to expand to TRON DeFi platforms including JustLend DAO and SUN.io, giving Ethena access to a network with more than 403M accounts and a large existing base of dollar-denominated stablecoin activity.

This Week's Calendar

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.

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