- Waller Shifts in a More Hawkish Direction: Fed Governor Waller delivered what I view as a fairly significant shift in tone today. Waller has historically been one of the more dovish members of the FOMC, often characterizing tariff-driven inflation as transitory and emphasizing softer labor market dynamics. In today’s speech, however, he stated that based on recent data he would support removing the “easing bias” language from the Fed’s policy statement, making it clear that rate cuts are no more likely than rate hikes going forward. While he stopped short of explicitly advocating for hikes near term, the message was clear: the Fed will likely need to see either materially softer inflation data or meaningful labor market deterioration before shifting back toward a dovish stance.
- Fed Funds Futures Continue Repricing Higher: Following Waller’s remarks, Fed funds futures continued moving incrementally more hawkish. Markets are now beginning to price a non-zero probability of hikes by September, alongside higher implied rates into late 2026 and early 2027. Despite this, equities largely shrugged off the rhetoric, likely aided by weakness in crude throughout the day. Over the past week, S&P futures and front-month crude have exhibited a fairly tight inverse relationship, and today’s pullback in oil likely helped offset some of the pressure from higher rate expectations.
- Crypto Diverged Meaningfully from Equities: One of the more notable developments today was the divergence between crypto and equities. While equities held in relatively well, BTC was on track for a ~2% drawdown heading into the close, with broader crypto seeing additional weakness. We looked back historically at days where BTC declined ≥2% while S&P futures were simultaneously up at least ~30bps. The signal itself is not exceptionally rare (~5% of observations since 2020), and visually, the setup has historically preceded both sharp rallies and meaningful drawdowns. That said, the median short-term forward performance following these occurrences tends to be fairly choppy, with muted win ratios over the subsequent 1–4 weeks. One important caveat is that this analysis was completed prior to the official crypto market close, meaning the signal may ultimately not trigger depending on late-session price action.
- Summer Positioning and Call Overwriting May Be Weighing on BTC: One possible explanation for crypto’s underperformance today is seasonality-related. Implied volatility continued to compress sharply across tenors this week, particularly within the 1-month bucket, where implied vol has now fallen to its lowest level since October 2025. My suspicion is that traders may increasingly be “packing it in” heading into the Memorial Day weekend and broader summer period, leading to some de-risking alongside elevated call overwriting activity that may have created incremental downside pressure on BTC. That said, one important caveat is that 25-delta skew has actually moved in a more constructive direction recently, suggesting downside hedging demand may be easing and complicating a purely bearish interpretation of the recent volatility compression.
- HYPE ETFs Post Solid Debut: Hyperliquid was not immune to today’s drawdown, but I continue to think it remains one of the stronger relative opportunities in crypto should the market stabilize over the coming weeks. Importantly, institutional-style flows continue to build around the ecosystem. I suspect Hyperliquid Strategies remains active on the HYPE acquisition front, while recently launched Hyperliquid ETFs have already attracted roughly ~$70M in cumulative inflows during their first week. Relative to a circulating market cap around ~$14B, these flows are meaningful on the margin and likely contribute to the reflexive dynamic currently supporting HYPE.
- Bottom Line: Waller’s speech represented a meaningful hawkish shift from one of the Fed’s more dovish voices, though equities largely absorbed the rhetoric thanks in part to lower crude prices. Crypto, however, diverged materially and appears increasingly impacted by positioning dynamics, summer de-risking, and volatility compression. Taken together, the data reviewed today point toward continued near-term choppiness rather than a clear directional trend.
Tickers in this video: BTC -3.23% HYPE -4.63% PURR
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