Powell Stays Cautious as State Reserve Movement Gains Momentum

Fed Chair Powell's testimony to Congress reinforced our view that rate cuts remain off the table until Q4. Despite pressure from Trump administration officials calling for rates "two to three points lower" and Fed Governors Waller and Bowman hinting at July cuts, Powell maintained a cautious stance. His neutral tone on rate cuts—deliberately passing on multiple opportunities to signal imminent easing—confirms the Fed's wait-and-see approach given tariff uncertainties.

Powell cited the solid economy and job market as reasons to hold rates steady, while acknowledging that tariff-induced inflation could become visible starting in July. This aligns with our expectation that the Fed will wait for September and October CPI prints before acting, likely delivering a 50bp cut in December rather than earlier moves.

For crypto markets, the message is clear: no sustained boost from Fed easing anytime soon. With Bitcoin already trading in six-figures, the macro tailwind from rate cuts appears elusive in the near term.

Meanwhile, institutional momentum continued building with Bitcoin ETFs seeing massive $588M inflows, while Ethereum ETFs pulled in $71M. The sustained demand despite elevated Bitcoin prices demonstrates growing conviction at these levels.

Corporate treasury adoption reached new heights with MetaPlanet raising $517M specifically for Bitcoin purchases, and Norway's Green Minerals eyeing a $1.2 billion raise for its Bitcoin treasury. The state-level Bitcoin reserve movement is accelerating rapidly, with Arizona lawmakers advancing legislation to establish a crypto reserve using seized funds while Ohio eyes its own program. This follows Texas becoming the first state with a publicly-funded Bitcoin reserve, creating powerful precedent for state-level adoption.

Adding to the institutional momentum, prediction platform Polymarket is raising $200M in a funding round led by Founders Fund, signaling continued venture capital interest in crypto infrastructure despite the sector's maturity.

Markets responded positively but with measured gains, reflecting the digestion of recent strong moves:

·      Global market cap: ↑ 0.43% to $3.27T

·      Bitcoin: ↑ 0.75% to $106,200

·      Ethereum: ↑ 0.53% to $2,429

·      Solana: ↑ 0.21% to $145.42

The modest gains mask significant underlying strength, with Bitcoin holding firmly above $106K while institutional flows accelerate. Powell's cautious stance on rate cuts removes any near-term macro tailwind, but the growing state reserve movement and sustained ETF flows continue building structural demand.

The Senate Banking Committee's plan for comprehensive crypto market rules adds regulatory clarity to the backdrop. While Fed easing may not provide immediate support, the combination of state adoption, corporate treasury moves, and record institutional flows creates a solid foundation independent of monetary policy.

With institutional demand surging despite the absence of Fed support, we maintain heavy exposure. The structural drivers—state reserves, corporate adoption, and ETF flows—appear resilient to macro headwinds and provide confidence for continued upside.

Positioning:

·      Cash: 10% – Maintaining flexibility given Fed's cautious stance

·      BTC: 72% – Increased exposure; record ETF inflows signal sustained demand

·      ETH: 12% – Boosted allocation; strong institutional momentum continues

·      SOL: 6% – Slight trim; focusing on assets with clearest structural demand