The Fed hiked 25bp on Wednesday, its first increase in three years, taking rates to 3.75-4.00% on a unanimous vote. Overnight, the Bank of Japan followed with a move to 1.25%, its highest policy rate in more than three decades. Both decisions came only a week after the ECB tightened policy.
Yet the broader market narrative remains unchanged.
The common theme across markets is becoming harder to ignore: policy is moving, but liquidity and supply are setting the price.
Macro: The Price of Credibility
Last Friday’s CPI removed any remaining doubt over the Fed’s next move. Core inflation printed 0.3% month-on-month versus 0.2% expected, with headline inflation at 0.4% and 3.4% year-on-year. Combined with Brent crude continuing to stay elevated following disruptions to Saudi energy infrastructure and renewed geopolitical tensions in the Gulf, the disinflation narrative lost much of its foundation.
Markets quickly repriced. Rate-hike odds moved above 90%, and the Fed delivered exactly that: a 25bp increase alongside updated projections that still point to the possibility of further tightening before year-end.
Yet the bigger story lies beyond the Fed. Long-dated Treasury yields remain near cycle highs, with the 30-year around 5.3% and the 10-year near 5%. Investors appear increasingly focused not on the destination of policy rates, but on the amount of debt the market is being asked to absorb.
Treasury issuance remains elevated, deficits continue to widen, and investors are demanding greater compensation to finance them. The rise in term premium has become as important as the path of monetary policy itself.
Crypto: Bad News, No New Lows
Bitcoin spent most of the week absorbing a steady stream of negative headlines.
Hot inflation. Higher rates. A 10-year Treasury yield above 5%. A setback for US crypto legislation. A Bank of Japan hike. By any conventional framework, that should have produced a more risk-off move.
Instead, Bitcoin drifted lower into Wednesday’s FOMC decision, briefly touching USD 75,000 before stabilizing and rebounding toward USD 78,000 as we head into today’s session.
The legislative setback is worth watching. The failure of the CLARITY Act to advance delays regulatory certainty and leaves further progress dependent on SEC and CFTC rulemaking. Yet the muted price reaction reinforces the idea that regulation is currently a secondary driver compared with macro liquidity and institutional positioning.
Bitcoin continues to face heavy supply in the USD 80-82,000 region, an area that has repeatedly capped rallies over recent weeks. A decisive reclaim of that range is likely needed to re-establish upside momentum and shift market sentiment more constructively.
For now, however, the market remains well supported. Despite a hot CPI print, a Fed hike, higher Treasury yields and a regulatory setback, Bitcoin has held above key support levels and attracted buyers on dips. The inability of bears to force a sustained break lower is becoming as notable as the inability of bulls to break higher.
The exceptions, as always, were projects with their own catalyst. ZEC is up ~37% on the week after governance participants overwhelmingly approved a proposal to reduce block times while preserving the existing halving schedule. Meanwhile, NEAR advanced 43% on the week as adoption metrics for Near Intents continued to accelerate.
The message remains the same: investors remain willing to back compelling narratives, but broad risk appetite has yet to return.
Looking Ahead: The Bill Comes Due
With the event calendar thinning out, the focus now shifts from headlines to market structure. The question is no longer whether central banks can tighten. It is whether markets are willing to finance ever-growing deficits at current prices.
The popular narrative is that Bitcoin benefits when capital rotates out of growth stocks. A more compelling framework is that Bitcoin benefits when investors become less willing to own long-duration fiat assets. If financing government debt requires persistently higher yields, the conversation then becomes a question of debt sustainability, capital allocation and the price investors demand to fund the system.
And that is a far more powerful structural tailwind than any rotation out of equities.
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