Kevin Warsh chaired his first FOMC meeting Wednesday and the Federal Reserve held its benchmark interest rate steady, while signaling its next move could be a rate increase. The federal funds rate stays at a range between 3.5%–3.75%. The bigger headline was the updated dot plot — a sharp reversal from March, when the median committee member was projecting a quarter-point cut in 2026. Now they're penciling in a hike.

Driving the shift is energy-driven inflation. CPI hit 4.2% in May, the highest since April 2023, after the Iran conflict spiked oil prices. Warsh, long skeptical of forward guidance, abstained from the dot plot and revamped the policy statement into a shorter, simpler version. He floated task forces to review Fed communications, the balance sheet, data reliance, productivity and jobs, and the inflation framework, while reaffirming the 2% target.

The market repriced fast. CME FedWatch now puts the odds of a rate hike at the Fed's July meeting at 28%, up from 8% before the announcement. Trump, who nominated Warsh hoping for cuts, told reporters in Paris the decision was fine with him.

The dot plot did the damage. The Dow Jones Industrial Average fell 507.12 points, or 0.98%, after touching a fresh intraday record earlier in the session. The S&P 500 lost 1.21% and ended at 7,420.10. The Nasdaq Composite shed 1.34% and settled at 26,021.66. Megacap tech led the slide, with Microsoft, Meta Platforms, Alphabet and Amazon all closing in the red.

The bond reaction was more violent. The two-year Treasury yield — the curve's most rate-sensitive point — jumped 14 basis points to near its highest level in over a year. Gold, which dislikes higher real rates, fell 0.8% after giving back earlier gains. Markets entered 2026 priced for cuts; the Iran energy shock has flipped the entire bias.

Single-name action was split. BMW shares fell nearly 7% after cutting 2026 guidance on China weakness and war-related disruptions. SpaceX shares rose more than 3% in premarket trading, extending the post-IPO run that briefly pushed it past Microsoft to become the fourth-largest U.S. company by market cap.

Bitcoin took the hawkish Fed surprisingly well. BTC ended the U.S. session lower by 1.6% to $64,600, a notable divergence given the magnitude of the two-year yield spike and the equity drawdown. The token sits around $65,000, down roughly 50% from its October all-time high, with the Fear & Greed Index reading 23 (Extreme Fear).

More interesting is the structural setup. CoinDesk flagged that Bitcoin's Sharpe ratio hit a level that has marked every cycle low since 2015, but in each case it preceded months of basing rather than an immediate rebound. Long-term holders absorbed roughly 125,000 BTC in June alone — accumulation that historically only shows up near the end of bear phases.

Sentiment among the heavyweights splits. Scaramucci expects Bitcoin to begin rallying in late 2026 and continue into early 2027, framing the current apathy as opportunity. Bitwise CIO Matt Hougan is more measured, arguing the next bull run will be slower, less volatile as investors' crypto appetite evolves, with capital rotating toward stablecoins and tokenized real-world assets rather than directional BTC bets.

Fidelity is launching the Fidelity Reserves Digital Fund Thursday — a money market fund designed for stablecoin issuers and institutional investors under the reserve requirements established by the recently enacted GENIUS Act. It holds U.S. Treasury bills, notes and bonds with maturities of 93 days or less, cash, overnight repurchase agreements backed by Treasuries, and other compliant government MMFs.

The launch lands just days after State Street unveiled a similar product, with BNY, BlackRock, and Federated already filing comparable funds. The pattern is clear: traditional asset managers are turning stablecoin regulation into a fixed-income business line. Stablecoins are a roughly $320 billion market today, with industry forecasts cited by State Street projecting between $1.9 trillion and $4 trillion by 2030.

This is one of the most underrated structural trades in crypto right now. The issuer business model is reserve yield. The GENIUS Act forces those reserves into liquid, conservative, compliant vehicles — exactly what Wall Street already runs. Whoever wins this niche becomes the default cash manager for the regulated stablecoin economy. Fidelity, which already issues its own stablecoin (FIDD, launched in February), now has a vertical few competitors can match.

The largest U.S. derivatives exchange is going to war with its regulator. CME plans to sue the CFTC after the agency approved Kalshi's perpetual futures product, with CEO Terrence Duffy arguing the product did not meet the Dodd-Frank Act's definition of a "swap". It's a direct shot at a prediction-market upstart that has built an unusually strong political alliance with the Trump administration.

The lawsuit threat arrives as state-level resistance escalates. Kentucky is targeting prediction markets, putting the red state in a potential clash with the Trump team, which has held that states have no business with firms like Kalshi and Polymarket. The intra-coalition fight is just starting.

The structural story matters more than the litigation. Perpetual futures have been crypto's signature innovation and the most profitable product at every offshore exchange for nearly a decade. CFTC approval brings them onshore for the first time, threatening CME's near-monopoly on regulated U.S. futures. Whether CME wins in court or not, the genie is out: U.S. perps are coming, and they will reshape how Americans trade everything from Bitcoin to interest rates.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.