Policy-by-tweet

Daily Updates:

• Nearly four months into the year, one thing that’s clear is that President Trump’s policy-by-tweet approach has rocked financial markets. 
• Earlier in the month, we experienced a near simultaneous selloff in equities, bonds, the dollar and eventually in crypto too – treasuries moving in line with risk-on assets was already a rare phenomenon, but treasuries selling off alongside a fall in the dollar can be described with a quote from Chair Powell: "there isn’t a modern experience for how to think about this".

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• Despite attempts (and recent wavering) to interfere with Fed independence, markets are not just trading based on Trump’s tweets – they are also still reacting to comments from Fed members, and we saw exactly that yesterday.
• US treasuries rallied after Cleveland Fed President Beth Hammack said on CNBC that if the Fed has “clear and convincing data by June”, it could begin to cut interest rates once again. She noted, however, that it would be too soon to change rates in the May meeting. 
• Yields on the 2 year maturity, more sensitive to Fed policy, fell 7bps to 3.79% following the interview. 
• US equities continued their rebound for a third consecutive day, with the S&P 500 closing up 2.03% and the Nasdaq-100 rising 2.79%. 

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• Hammock wasn’t the only Fed member to advocate for a rate move in the near future either. Speaking on Bloomberg Television, Governor Christopher Waller said it wouldn’t be surprising “that you might start seeing more layoffs, a tick up in the unemployment rate going forward if the big tariffs in particular come back on”. Waller added that he finds it imperative that the Fed would “step in” if the employment side of the dual mandate fell under significant stress and “would expect more rate cuts and sooner” in the face of a “serious deterioration of the labour market”. 
• The market entitled ‘Fed rate cut by June meeting?’ on Polymarket jumped up slightly following comments by both Fed speakers from 50% to 53% in favour of ‘Yes’ and has held at that level since. One of the topics covered in our most recent Polymarket report, found here, was identifying divergences between market expectations of Fed monetary policy between traders on Polymarket and the implied odds of policy changes via CME’s 30 day Fed Funds futures. 

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• BTC has recently shown signs of detaching from its macro correlations, holding firm or sometimes even rallying when its US-equity counterparts sold off. 
• That’s something we had anticipated: 

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“With this macro factor and the two additional drivers, it could be the case that this time is different and Bitcoin detaches from its correlation to these risk-on macro assets, outperforming US equities and continuing to rally even if they sell-off.” Read that in full here and here.

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• BTC has continued to rally as equities move up too. Yesterday, as equities rose, BTC pared back most of its losses from earlier in the day and is currently trading at $93K, up 10% for the week. ETH trades slightly below $1.8K, up 12% on the week.  
• In altcoins, SUI continues its rally, up another 22% in the last 24 hours following news of the spot ETF submission yesterday and the overall relief rally over the past week. This puts SUI at approximately $3.70, up 73% over the past week yet still shy of its $5.35 all-time high. 
• We noted however that derivatives markets have not been particularly supportive of the euphoria earlier in the week. 
• At-the-money implied volatility for BTC, ETH, and SOL has continued to trend down, and not just at the front-end either. The 180-day tenor for BTC is trading near its lowest levels all month. 
• ETH’s term structure has maintained its flat shape and ETH funding rates remain close to 0%. BTC funding rates on the other hand briefly fell even further to -0.009% — a new low for April. 

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• President Trump will host an exclusive dinner with the top 220 holders of his memecoin token $TRUMP which was launched days before his inauguration. The token currently trades nearly 4x below its ATH of $45, however rallied by over 50% on the news. According to the token’s website “from April 23 to May 12, your average $TRUMP balance determines your spot”. 
• The Federal Reserve Board has withdrawn its previous guidance for banks regarding crypto-asset and dollar token activities, signalling a shift in its regulatory stance. This move reflects evolving perspectives on the oversight of digital asset-related operations within the banking sector. The withdrawal also includes adjustments to the Fed’s expectations for how institutions engage with these technologies, potentially opening the door for a more flexible, risk-based approach as the digital asset landscape continues to develop.
• The TON Foundation has appointed MoonPay co-founder Maximilian Crown as its new CEO, aiming to scale the blockchain through their unique "access to over 1 billion Telegram users" and driving global adoption.

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• Coinbase is enabling zero-fee USD-PYUSD conversions for both retail and institutional customers, in a bid to boost adoption of PayPal’s PYUSD stablecoin. Coinbase will also support 1:1 PYUSD-USD trading and custody, while exploring new onchain use cases.

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• Trad-Fi derivatives exchange CME Group has set May 19 as the launch date for XRP futures, pending regulatory approval. It will offer both micro (2,500 XRP) and standard (50,000 XRP) contract sizes.

This Week’s Calendar:

Charts of the Day:

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