Tariffs Shake Markets

Daily Updates:

• In TradFi markets, the week began with a risk-averse nature as global equities dropped while the US dollar strengthened slightly, up 0.44% today. 
• SPX futures fell 0.5%, China’s CSI-300 index ended 0.43% lower and the Nikkei-225 dropped 0.56%.
• Those moves coincide with President Trump stating that countries aligning with “the Anti-American policies of BRICS” will be subject to an additional 10% tariff. 
• On Truth Social the President also said that the US will also send out “TARIFF Letters, and/or Deals” from 12 pm eastern time today.

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• Trump’s self-enforced tariff deadline from his program of reciprocal tariffs announced in early April is set for July 9. 
• However, members of his administration have stated that the deadline will be extended to August 1 to give countries more time to negotiate deals. 
• On Sunday, Trump told reporters “I think we’ll have most countries done by July 9, either a letter or a deal”.  
• His Commerce Secretary, Howard Lutnick told reporters that “Tariffs go into effect August 1, but the president is setting the rates and the deals right now”. 

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• Treasury Secretary Scott Bessent also indicated some countries may be offered a three-week extension to negotiate.
• Speaking in interviews across two programs yesterday, Treasury Secretary Scott Bessent said President Trump’s letters sent to trading partners this week aren’t the final word on countries’ immediate tariff rates. The levies will kick in August 1, so there’s still time for those that aren’t close to an agreement to bring offers to the table according to Bessent. 

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• The risk-averse opening to the week in global equities has however failed to materialise in cryptocurrency spot prices so far today which are up on the day. 
• Earlier in the week, BTC spot price steadily moved higher from $105K to $110K. However, over the weekend, BTC settled at a lower $108K, mostly trading sideways. 
• Similarly, ETH spot price moved up from $2,400 to $2,600 before spending the weekend trading sideways at $2,500.
• That sideways spot activity coincided with flat at-the-money implied volatility for both BTC and ETH options across tenors. 
• After a jump last Friday from 26% to 33%, 7-day BTC options currently trade with a volatility premium of 34%, in comparison to the nearly twice as large 60% premium in ETH short-tenor options. 

• Bigger moves were however seen in BTC funding rates which spiked from neutral levels to 0.012% and in futures spot yields – as the yield on the 7-day tenor has more than tripled from 2.38% to 7.24%. 
• In comparison, the response from ETH perpetual funding rates and spot yields have been more muted – with 7-day spot yields remaining at 4-5%. 

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• The pressure on Chair Powell to resign increased last week. Powell, has been subject to continued criticism from President Trump for being “too late” at cutting interest rates. 
• Bill Pulte, who leads the Federal Housing Finance Agency, called on Congress to investigate Powell, alleging that his recent testimony to the Senate about the planned renovations to the Fed’s headquarters was “deceptive.”
• In another post Pulte said “Powell needs to resign”. President Trump posted a link to a Bloomberg article regarding Pulte’s comments with the caption “‘Too Late’ should resign immediately!!!”. 

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• TON’s announced a TON Staking Visa, equivalent to a 10-Year UAE Golden Visa eligible for users who stake $100K* in TON for 3 years and pay $35K* processing fees. 
• Immediately after, the Federal Authority for Identity, Citizenship, Customs and Port Security (ICP), the Securities and Commodities Authority (SCA), and the Virtual Assets Regulatory Authority (VARA) released a joint statement via state news to clarify that UAE does not grant golden visas exclusively based on the holding of digital currency. 
• TON rallied nearly 10% on the back of the initial announcement but has since fallen eliminating the gains. 

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• El Salvador have reportedly added 8 BTC to their Bitcoin Holdings over the past week, bringing theIr total to 6,229 BTC.

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• Ethereum co-founder Vitalik Buterin and researcher Toni Wahrstätter have put forward EIP-7983, proposing a 16,777,216 gas cap per a single transaction, rejecting transactions sent above the gas limit.
• This aims to “Reduce the risks of single-transaction DoS attacks. Enable more predictable zkVM circuit design. Promote fairer gas allocation across transactions within a block.”

This Week’s Calendar:

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

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Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes