Bitcoin Stays Strong as Trump and Bessent Push Fed Overhaul, $125K Still in Sight
Digital Asset Market: Spot Bitcoin ETFs ended their 12-day streak of inflows, recording $131.35 million in outflows on Monday, after accumulating $6.6 billion in the previous days. The largest outflow was from ARK Invest's ARKB, followed by Grayscale's GBTC and Fidelity's FBTC, while BlackRock's IBIT remained unchanged. Overall, net inflows into spot Bitcoin ETFs remain strong, at $54.62 billion, with total assets reaching $151.60 billion, or approximately 6.5 percent of Bitcoin's market capitalization. The outflows are attributed to profit-taking and risk management by investors near Bitcoin's recent highs, which are described as a routine correction rather than a panic. Meanwhile, spot Ether ETFs continued to attract capital, with a $296.59 million net inflow on Monday, pushing their total net inflows to $7.78 billion.
In other news, President Donald Trump has pledged to permanently ban the creation of a central bank digital currency (CBDC) in the United States, signing an executive order in his first week back in office that prohibits federal agencies from establishing or promoting a CBDC. He reiterated this commitment while signing the GENIUS Act, which establishes strict regulations for U.S. dollar-backed stablecoins, requiring full reserve backing and increased transparency for issuers.
Macro Economics: The United States is likely to agree on extending the trade tariff suspension with China. U.S. Treasury Secretary Scott Bessent has stated this as a most probable outcome when he meets Chinese officials in Stockholm, Sweden, next week. The current 90-day suspension of most heavy tariffs, agreed upon in mid-May to allow for continued trade negotiations, is set to expire on August 12. Bessent expressed optimism about the trade relationship, noting progress and a constructive atmosphere. He said the upcoming talks will also address other issues, such as China’s purchase of sanctioned Russian and Iranian oil, as well as efforts to encourage China to focus more on building its consumer economy. Swedish Prime Minister Ulf Kristersson confirmed Sweden’s role as host, emphasizing the importance of the discussions for global trade and stability. The development follows multiple rounds of negotiations that saw both countries significantly reduce tariffs after a period of escalating duties under President Trump’s administration.
Equities: US stocks were mixed on Tuesday as the S&P 500 and Nasdaq pulled back slightly from record highs, weighed down by underwhelming earnings from companies like General Motors, Lockheed Martin, NXP Semiconductors, and Philip Morris. GM's profits were significantly impacted by tariffs, fueling investor concerns about trade policy as talks with major partners stalled and a US-China deadline loomed. Meanwhile, AI-related stocks like Nvidia and Broadcom also slipped following reports of setbacks in a major OpenAI project. While most S&P 500 companies have exceeded earnings expectations so far, investors are cautious about stretched valuations and await key results from Alphabet and Tesla for signs of continued momentum, especially as the hype around AI is tested.
The Fed and US Treasury: Treasury Secretary Scott Bessent on Monday urged a “fundamental reset” of U.S. financial regulations to better align with domestic and international priorities, calling for an internal review of the Federal Reserve’s non-monetary operations and questioning the $2.5 billion cost of its headquarters renovation. Although President Trump has pressured Fed Chair Jerome Powell to resign over slow interest rate cuts and management issues, Bessent clarified that he does not believe Powell should step down before his term ends in May, affirming the importance of maintaining the Fed’s monetary policy independence. While criticizing the Fed's institutional expansion and costly projects, Bessent also advocated for easing regulatory burdens on banks, potentially by revisiting or scrapping some capital requirements. Seen as a possible successor to Powell, Bessent has underscored the need for greater transparency, accountability, and modernization of the financial regulatory framework to ensure stability and foster economic growth.
Geopolitical: While the Trump Administration had made US AI leadership a top priority, its recent decision to allow Nvidia to resume sales of its advanced H20 AI chips to China, after initially blocking them, has undermined that goal. The move, reportedly part of a broader trade truce in which China agreed to resume rare-earth mineral exports, signals that national security policies, such as technology export controls, are now negotiable. This concession, influenced by both lobbying from Nvidia and a desire to finalize a trade deal, risks empowering China’s AI industry while weakening the administration’s ability to enforce future technology restrictions without escalating trade tensions. Nvidia is the obvious winner, but the impact on the US AI race is yet to be seen.
View from our desk
Bitcoin Builds Pressure for Breakout Toward $125K
Bitcoin remains remarkably strong following a brief $131 million in net ETF outflows, especially after absorbing $6 to $7 billion in inflows over previous days. The lack of profit-taking and continued supply constraints indicate a healthy foundation. While some expected a correction after the recent surge, the minimal retracement shows buyers are holding firm. With momentum intact, we are now targeting $125,000 in the next leg up, and our year-end projection of $150,000 looks increasingly within reach.
Trump and Bessent Call for Fed Overhaul
Scott Bessent’s recent comments on the need for deeper reforms in bank regulation echo a broader political narrative. President Trump has committed to banning a central bank digital currency and appears intent on replacing Chairman Powell. This signals a push not just for leadership change, but for a more fundamental restructuring of the Federal Reserve. We believe in a streamlined, market-driven regulatory framework that rewards business builders rather than theoretical economists detached from real-world impact.
AI Power Surge Exposes U.S. Grid Weakness
The U.S. power grid is buckling under pressure as the rise of AI data centers drives up electricity demand beyond capacity. PJM Interconnection, the country’s largest grid operator, has issued multiple warnings, citing no spare generation capacity amid aggressive fossil fuel plant retirements. At the same time, China is rapidly expanding its power infrastructure to meet the future demand for AI. Without immediate investment in new energy sources, including nuclear power, the U.S. risks falling behind in the global AI race.
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