3 min läsningThis week saw a convergence of macro, monetary, and geopolitical forces that supported digital asset prices.
While the consumer confidence index came in at 93, not the lowest reading in recent months, it marked the largest downside surprise versus expectations in over a year. This underscores the growing difficulty analysts are having in gauging the effects of tariffs and its impact on the consumer. The macro backdrop was further muddled by a marginally better-than-expected set of PMI data for both the manufacturing and services sectors, while durable goods orders pointed to persistent inflationary pressures. Core PCE came in marginally above expectations while personal incomes fell way below consensus at -0.4%.
Jerome Powell faces increasing pressure
It was also a pivotal week for Federal Reserve Chair Jerome Powell. Pressure is mounting, not just from President Trump, who reiterated his call for rates to be “two to three points lower,” but also from within the Fed itself. Governors Chris Waller and Michelle Bowman have both suggested they may be prepared to support a rate cut as early as July. Against this backdrop, Powell struck a cautious tone during his Senate testimony, effectively reiterating the FOMC’s message from last week. While stating that the labour market and economy remain “solid,” he acknowledged that “inflation has eased significantly from its highs” but “remains somewhat elevated” relative to the Fed’s 2% longer-run goal.
Powell indicated the Fed is in a wait-and-see mode, particularly around how tariffs impact inflation: “We are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
Patience, however, appears to be wearing thin at the White House. Reports suggest Trump may announce his nominee for Fed Chair as early as Summer/Autumn 2025, well ahead of the May 2026 transition date. The frontrunners appear to be current Fed Governor Chris Waller, seen as a dovish candidate who has publicly advocated for a July rate cut, and former Governor Kevin Warsh, a noted hawk and less likely pick in our view. According to Polymarket, Waller currently holds the highest odds of being appointed, which has contributed to a sharp repricing in rate expectations, with markets now forecasting the highest number of cuts so far this year.
Markets have already begun to price in this policy shift. The dollar fell on news of Trump’s potential early intervention in Fed leadership, adding further tailwinds to fixed-supply assets such as gold and bitcoin. The decline in the dollar is also being driven by Treasury Secretary Scott Bessent’s decision to extend the debt ceiling timeline to July 24th, once again deferring the need to confront the US’ growing fiscal challenges.
In a further development for the digital asset space, Texas has become the first U.S. state to establish a publicly funded bitcoin reserve. Governor Greg Abbott signed Senate Bill 21 into law, allocating $10 million for bitcoin purchases. This move sets Texas apart from states like Arizona and New Hampshire, which have made similar announcements but not yet allocated capital.
Geopolitical factors also played a significant role this week. Despite President Trump’s claims of successful strikes on Iran, a leaked Pentagon report suggested the outcomes were more limited, regardless, oil prices plummeted. While macroeconomic data had a muted impact on digital assets and rate expectations, intraday price data shows that geopolitical events—particularly the announcement of a ceasefire following U.S./Israeli bombings—had a far more significant influence. Bitcoin showed a stronger correlation with oil prices than with interest rate expectations, a reminder that inflation sentiment and geopolitical developments remain deeply intertwined.
Interestingly, Iran has been suspected of mining Bitcoin at a governmental level, and the recent bombings of nuclear sites coincided with a sharp decline in Bitcoin hashrate, suggesting that the attacks may have also disrupted mining operations in the region.
Fund flows continue to support digital assets, with US$2.1B in inflows so far this week, and US$5.5bn month-to-date. Year-to-date inflows have now reached US$17.2B, pushing total assets under management to US$185B—just shy of the US$187B all-time high. These continued inflows underscore investors see digital assets as attractive amid an environment charged with both geopolitical tension and monetary policy uncertainty.
