Vigilant on Inflation, or Behind the Curve on the Labour Market?

Find out our latest reports, listed below:

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• Bybit x Block Scholes Quarterly Report: What will drive crypto in Q3 2025?‍
• Bybit x Block Scholes July Volatility Review‍
• ‍Bybit x Block Scholes Quarterly Report: Altcoin season and the evolving role of Bitcoin

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Daily Updates:

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• The very modest recovery in crypto-asset spot prices between late Wednesday and Thursday was reversed, as BTC fell from just under $114K back down to $111K through yesterday evening. Over the past week, spot prices have plunged lower across the entire spectrum of the market — Ether is down 12.5% in the last seven days, compared to a 4.6% decline in Bitcoin, and a 16.4% drop in Solana.
• The selloff in spot prices began at the start of the week on Monday when more than $1.5B of long positions were liquidated, marking the largest long liquidation event so far this year, according to data from Coinglass.

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• After some sideways trading following a sharp spike in short-dated volatility on Monday, ATM IV levels have uniformly crept up slightly for both BTC and ETH over the past 24 hours, with ETH outperforming. Nonetheless, at-the-money volatility for short-dated BTC options trade at 31% — close to the lower end of their historic range.  
• Both BTC and ETH options traders continue to remain fearful of a further spot price selloff as volatility smiles remain incredibly skewed towards OTM puts.
• For BTC, traders do not see any reprieve from the bearish sentiment even on longer horizons, as skew remains negative across the term structure. For ETH however, the longer-term outlook remains slightly more bullish with 180-day options holding a slight preference for OTM calls.

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• At the start of the week crypto-asset prices bucked their trend with US equities as the latter rose to all-time highs, bolstered by developments in AI and an announcement from Nvidia to invest as much as $100B in OpenAI. That pushed the S&P 500 to its 28th ATH this year. Last Thursday, all four major US stock benchmarks closed at fresh highs, for the first time since November 2021.
• Yesterday however, the S&P 500 fell 0.3%, a second, consecutive loss after declining in Tuesday’s session too. The pullback on Tuesday followed a comment from Chair Powell that “equity prices are fairly highly valued” (see that here).

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• US treasuries also fell yesterday as traders continue to parse a slew of diverging views on the path of monetary policy from Federal Reserve officials. Yields rose by two to three basis points across maturities.
• In the past week alone, three different Fed officials cited concerns over inflation. On Tuesday, Atlanta Fed President Raphael Bostic said “it’s incumbent upon us to continue to stay vigilant in the fight against inflation” particularly due to the Fed “not having been at target for over four-and-a-half years”.
• That mirrored comments from his Cleveland Fed counterpart, Beth Hammack, who said on Monday, “I feel like the labour side is still in a pretty good shape, and I’m really worried about what’s going on with inflation”.
• In an interview with CNBC, Chicago President Austan Goolsbee stated “Eventually, at a gradual pace, rates can come down a fair amount if we can get this stagflationary dust out of the air”, however “with inflation having been over the target for four-and-a-half years in a row, and rising, I think we need to be a little careful with getting overly, up-front aggressive.”

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• On the other hand, in a speech on Tuesday a more dovish Fed member, Governor Michelle Bowman, emphasised her view that “tariffs will have only a small and short-lived effect on inflation going forward”.
• Bowman added that the Fed is “at serious risk of already being behind the curve in addressing deteriorating labor market conditions” and that “A strict interpretation of data dependence is inherently backward looking and would guarantee that we remain behind the curve”.

• San Francisco President echoed a similar message yesterday: “Moving forward, it is likely that further policy adjustments will be needed as we work to restore price stability while providing needed support to the labor market”.

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• Treasury Secretary Scott Bessent also weighed his view on interest rates yesterday. In an interview with Fox Business he claimed “Rates are too restrictive, they need to come down” and “I’m a bit surprised that the chair hasn’t signaled that we have a destination before the end of the year of at least 100 to 150 basis points.”

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• Bessent has also been busy with plans to extend a $20B swap line to Argentina and potentially buy the country’s foreign bonds in a bid to provide financial support to President Javier Milei. That follows his promise earlier in the week to provide “all options for stabilization” to the nation. The central bank has sold more than $1B of its US dollar reserves over three days last week to help stop the tumbling in the Argentinian peso.
• Back in April, Argentina introduced a band system to keep the peso within a trading range. Under those plans, when the currency falls to the lower end of the band (USD-ARS), the central bank will intervene by buying dollars to expand the peso money supply. When it reaches the upper end of the range, the bank will sell dollars for pesos (contracting the supply of pesos).

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• Amidst the frenzy of digital asset treasuries (DATs), GSR has filed with the SEC for an ETF that will allocate at least 80% of its assets to DATs that hold cryptocurrencies on their corporate balance sheets. The fund will mainly target large publicly listed firms in the US, however will also allow for private investment in public equity (PIPE) transactions.

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• The U.S. Senate Finance Committee has scheduled a hearing to address the taxation of digital assets, marking another step in Washington’s ongoing effort to clarify how cryptocurrencies should be treated under federal tax law.
• The session, titled “Examining the Taxation of Digital Assets,” is set for October 1 at the Dirksen Senate Office Building and will be livestreamed to the public. Committee Chair Senator Mike Crapo confirmed the hearing in a statement released Wednesday.

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• A group of nine major European banks has joined forces to develop a euro-backed stablecoin, a move aimed at strengthening Europe’s presence in the rapidly expanding digital payments market.
• The initiative was announced on Thursday through a press release from ING. The participating leaders include UniCredit, ING, Banca Sella, KBC, Danske Bank, DekaBank, SEB, CaixaBank, and Raiffeisen Bank International.
• According to the statement, the stablecoin is expected to launch in the second half of 2026. The token will be structured in compliance with the European Union’s Markets in Crypto-Assets Regulation (MiCA), which introduced a harmonized regulatory framework for crypto asset issuers and service providers across the EU.
• This private-sector euro stablecoin is separate from the European Central Bank’s digital euro (CBDC) initiative.

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• The US SEC and the Commodity Futures Trading Commission (CFTC) have released the agenda and panelists for their joint roundtable on regulatory “harmonization”, scheduled for September 29.
• The Panels will address how “harmonization” could create economic benefits for trading platforms while maintaining investor protections and how it can expand options for market participants and lower investor costs.
• Panelists include representatives from a mix of TradFi and Crypto-native platforms including - CME Group, Nasdaq, J.P. Morgan, Bank of America, Kraken, Crypto.com, Kalshi, and Polymarket.

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This Week’s Calendar:

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Charts of the Day:

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