Volatility Marches Lower

Daily Updates:

• Yesterday the White House press secretary Karoline Leavitt read out a statement to reporters from President Trump that said “Based on the fact that there is a substantial chance of negotiations that may or may not take place in the near future, I will make my decision of whether or not to go within the next two weeks” in reference to whether the US will back Israel in their conflict against Iran in the Middle East. 
• A reporter highlighted to Leavitt that President Trump has often set two-week deadlines only to renege them, citing the case of the Russia-Ukraine war and asked “How can we be sure that he’s going to stick to this one on making the decision on Iran?”. 

• The lack of clarity highlighted by the journalist seems to be a sentiment shared in financial markets too – while US equity markets were closed yesterday for the Juneteenth National Independence Day, contracts on S&P 500 futures initially fell 0.9% before paring back those losses later. 
• In Europe, the Stoxx 600 is down -1.03% over the past five days, while the Nikkei-225 also trades slightly lower today.

• BTC on the other hand continues to hold up strong, trading at $106K while ETH holds firm above $2500. 
• Earlier today, one of Arizona’s Bitcoin reserve bills was revived after the state’s Senate passed a motion to reconsider the bill. House Bill 2324, which was originally rejected in the House during its third reading on May 7, was brought back for reconsideration in a 16-14 vote, meaning the bill will now return to the House for another vote.
• HB 2324 will allow the state to create its own “Bitcoin and Digital Assets Reserve Fund” which will contain digital assets acquired through criminal forfeitures. 
• This isn’t the first crypto bill debated in Arizona’s government. The state’s Governor Katie Hobbs enacted HB 2749 into law on May 7 which permits the state to hold onto unclaimed cryptocurrency and establish a Bitcoin reserve without relying on taxpayer funds. 
• However, she has vetoed other bills such as SB 1025 which planned to develop the “Arizona Strategic Bitcoin Reserve Act”, authorising the state treasurer to invest as much as 10% of the treasury’s assets into Bitcoin and other cryptocurrencies.

• More sideways price action has seen ETH volatility continue its march lower, with the 7-day tenor at-the-money level falling to 63%. This followed a week-long inversion of the term structure that had begun on Jun 10, 2025.
• BTC vol has fallen lower too, now down to just 33% at the 7-day tenor. While ETH’s inversion has resolved, its volatility premium over BTC has not.
• Short-dated volatility smiles are still skewed negatively towards out-of-the-money puts for both assets, though for longer tenors which do have a moderated positive skew for upside exposure, the premium assigned to those OTM calls is higher in ETH than it is for BTC.
• Taking the example of the 120-day expiry, the skew for BTC options is 0.5%, compared to a more significant 2.64% for similar-dated ETH options.

• The Bank of England kept its benchmark bank rate on hold at 4.25%, in line with economists’ expectations, however committee members were more divided than anticipated by economists. 
• Six BOE Monetary Policy Committee members voted to leave rates unchanged while three preferred an immediate 25bps reduction – expectations were for a 7-2 split.
• According to the meeting minutes committee, members “expected a significant slowing over the rest of the year” in pay growth, and that there were “some greater signs of disinflationary pressures from the labour market.”
• The bank’s Deputy Governor Clare Lombardelli said that members are looking out for any inflationary impact from a potential rise in oil prices: “The events in the Middle East are tragic and they are deeply worrying. As you’d expect, we are monitoring carefully those events and the impact that those will have”. 

• The BOE was not the only European central bank meeting yesterday either. The Swiss National Bank cut interest rates in Switzerland for the sixth consecutive time – which has now brought interest rates down to zero percent in the region.
• President Margin Schlegel said “With today’s easing of our monetary policy, we are countering the lower inflationary pressure” and “we remain willing to be active in the foreign exchange market as necessary”.  
• The Swiss franc is up nearly 10% against the dollar this year already as many investors have piled into the currency as an alternative safe haven asset; that rally in the franc has partly played a role in consumer prices falling 0.1% from a year ago in May.  

• Hong Kong’s Stablecoins Ordinance will take effect on August 1, establishing a regulatory framework focused initially on fiat-referenced stablecoins.
• It introduces licensing requirements for stablecoin activities and provides further regulatory clarity in the region.

• The Trump family has reduced its stake in World Liberty Financial to an approximately 40% stake, following a drop from 75% in December to approximately 60% in January, and now further.
• The move may reflect an effort to pull profits amid heightened stablecoin sentiment given WLFI’s USD1 coin with an approximately $2.2B market cap.
• However, the USD1 coin remains highly centralised with $2B having been used to close Abu Dhabi-based MGX’s investment in Binance.

• Crypto Exchange platform Kraken has added BTC staking to their offering via Babylon.
• Babylon uses smart contracts that accept proofs of BTC in a time-locked Bitcoin address to delegate as stake on Proof of Stake (PoS) networks, allowing stakers to retain ownership of their BTC. Staking rewards are then received in $BABY, Babylon’s native token.

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