in New York morning trade, we are looking at Bitcoin lower right around the 81,000 level.
The market is trying to digest a lot of conflicting signals when it comes to digital as well as risk assets.
Now the Federal Reserve did hold rates steady at a time of rising energy costs, and underneath the surface policy uncertainty is brewing in the nation's capital.
Meanwhile, the convergence between Trad and the central. assets has never been more real.
We're looking at ETFs, corporate treasuries, and even Fannie Mae eligible mortgages entering the Bitcoin space.
Well, joining us to make sense of all of this is Thomas Perfumo, the Chief Economist for Kraken.
Thomas, great to have you here.
Thank you so much for joining me.
So we have a lot affecting the digital asset market, in particular Bitcoin.
So when it comes to monetary policy, what do you make of the outlook for the Fed?
Yeah, I, I've been focused on monetary policy and the Fed for quite a bit now because when you see the dislocation between crypto and risk assets like equities, it really took place around the time that Trump announced the nomination of Kevin Warsh.
And since then I think we've had a mixed bag in terms of the Fed outlook.
We've had increased certainty around the transition itself, that is, we think that Kevin Warsh is going to be confirmed next week, it seems, based on the Senate floor vote timing.
And so we're going to have that smooth transition coming into Jay Powell's term end in mid-May.
However, Jerome Powell stated during his FOMC press conference last week that he intends to stay on as a board governor, which I think is net bearish for risk assets, crypto included, in terms of the Fed rate outlook because people were assuming or thought that there was a high chance with the criminal investigation being dropped, that he might leave the board.
It gives another potential vote or nominee from the Trump administration to bring some. into the Fed who will be more dovish, similar to Kevin Warshch, and so that hasn't happened.
So it's, it's a bit of a mixed bag on the outlook right now.
Market's about 70% odds that we don't get any rate change over the next year.
And 2026 has been quite the volatile year, and we know it's not just crypto, it's all asset classes as well, whether we're talking about commodities or equities that we've seen plenty of volatility.
So when it comes to the price action of Bitcoin, how are you assessing the landscape both from a Fundamental as well as technical perspective.
Sure, so fundamentally, when I think about Bitcoin, it's a digital commodity.
So like oil, you're really trying to figure out what are the big demand drivers and supply drivers.
On the demand side, there's really two big vehicles that I tend to focus my time on ETF flows and then micro strategy because they've purchased collectively about $120 billion of Bitcoin in the last 2.5 years.
So they're the two biggest players in town.
On the supply side, I tend to look like metrics like Bitcoin days destroyed, which is a measure of transaction volume.
Older coins moving on chain, that's actually fallen to a 2 to 3 year low in the last quarter and it's continuing to decelerate into the second quarter.
And so the market for bitcoins is tightening up.
It's been, in my opinion, well supported in the low 60s range, but seeing the bids over the last few days into the 80s and breaking through that 800 line was a pretty meaningful move, especially because Microstrategy reported just a couple of days ago and they've likely been in a blackout period and not participating.
So it's been very ETF driven.
Yeah, we're continuing to monitor all the data that you talked about, but when it comes to the regulatory landscape, there are a lot of expectations given the fact that it is also a midterm election year.
We also heard from Patrick Wit yesterday.
So when it comes to clarity, do you think this is something that we can expect sooner rather than later?
Hopefully, I mean, to your point, it has to happen sooner than later because we don't have much.
Time with the campaign elections coming up.
My understanding is that that tends to heat up around the summertime.
And so procedurally, the next big step is going to be a release of the markup text, hopefully this month in the next couple of weeks.
And then from there you go through reconciliation, floor votes and whatnot.
But it seems to me that the biggest risk factor, which was the stable coin yield, that they came to a determination, a compromise where not everyone's Happy, but that's a compromise, and it seems like the prediction markets at the very least have indicated much higher probability versus even a couple of weeks ago.
I think we went from 45% odds to now 67% odds.
So I think the market is starting to tune into that expectation that we're going to get a good outcome here.
We're certainly hopeful.
Yeah, and I understand that you'll be taking the stage here on day three of consensus, and you're talking about the Great convergence.
So that is also the theme of Consensus 2026.
So give us a sneak peek.
Yes, so in terms of convergence with institutional, it's really a question around how has the Bitcoin market structure changed over the last 2.5 years with the rise of the ETF.
And my commentary around that is, you know, we've seen just tremendous success when it comes to equity market demand for.
Bitcoin exposure.
The proof in the proof points would be things like ibid, for example, being the fastest ETF to 1050, 100 billion of AUM, 4 or 5 times faster than predecessors like the VOO or the GLD.
Micro strategy, the biggest equity issue in the capital markets in the last two years, each year, and they were roughly 8% of the entire market last year.
And so I think it tells you that there's Screaming demand for this, let's call it trapped capital that we used to see where you had all this money in brokerage accounts that couldn't access Bitcoin exposure that's been unlocked.
The next phase, in my opinion, have been more of the slow movers, the allocators like the pension funds endowments that have been coming into the space, but slowly because they have to go through investment policy statement revisions and investor committees.
So it's a different ballgame for those players.
Yeah, and finally, you're a chief economist, so not only do you keep an eye on policy, whether we're talking about fiscal or monetary, but you're also looking at the global economy as a whole.
So where do you stand, especially given all this volatility, and what does this mean for risk assets as we head into the second half of this year?
Sure, so volatility is always an opportunity.
In my book.
So if you're a patient investor and you're excited about the moment that we're in, you know, this technological disruption cycle that can meaningfully step change productivity growth in the US and abroad, that is really AI, then you really do have, I think, an opportunity to be a winner or pick winners in this kind of environment.
I think.
It's really about time horizon and patience.
And so when it comes to crypto specifically, unfortunately it tends to be more sensitive to broader risk on sentiment, which has been risk off at least certainly from February and March.
And then of course liquidity, which has been a bit uncertain given the outlook uncertainty on the Fed itself.
I would say the situation is pretty.
Volatile because it's it's a conflict driven with war and kinetic warfare.
You really don't know.
It changes day to day.
That's going to determine the expectations around Fed outlook in particular, whether we get a quick resolution or not.
Hard to say on that front, but I would say that in terms of the indicators like the job data, for example, it's pretty healthy.
So as far as the US is concerned in isolation, it's holding up pretty well.
Unfortunately we have all the resources here.
To be able to withstand some kind of supply shocks abroad is a different story.
So it's almost a little bit more like a US versus the rest of the world issue.
And of course if the rest of the world's punished, the US can feel that too.
Yeah, and you mentioned jobs.
So in less than 24 hours we will be getting that employment report.
I'm sure both of us will be eyeing those non-farm payrolls as well as the details of that report.
So thank you so much, Thomas, for joining us today.
Thank you for having me.
Thank you.
