Summary

• Geopolitical headwinds kept markets risk-off, with oil hitting new year-to-date (YTD) highs and risk assets like BTC and equities selling off as investors sought safety.

• Stablecoins gained a decisive policy tail-wind, with the U.S. Senate passing the GENIUS Act (68-30). The policy push comes as total supply has climbed 22.5% over the past six months to over US$250B, with on-chain transfer volumes already topping US$20T.

• The Fed held rates steady, but the updated dot plot turned more hawkish, with more officials now projecting fewer—or no—cuts in 2025. It also trimmed its 2025 GDP forecast to 1.4%, adding weight to the higher-for-longer narrative and capping any immediate risk rebound.

Market Overview

Global markets faced heightened volatility this week as geopolitical tensions and central bank decisions converged. While equities and Bitcoin initially rallied in the first half of the week, sentiment reversed on concerns over an escalating Middle East conflict and broader geopolitical spillovers. Adding to the caution, the Fed held rates steady, and U.S. retail sales for May fell 0.9% month-on-month (MoM) — the sharpest drop in four months — hinting at early signs of tariff-related strain. In response, investors rotated into defensive assets, particularly the dollar, while oil prices climbed on renewed supply-chain concerns linked to geopolitical instability.

Figure 1: Weekly and YTD Performance – Crypto and Global Market Assets

Other developments, such as the new US-UK trade terms and better-than-expected UK CPI data, had little impact on market direction. Risk-off sentiment remains dominant in the interim, as investors tread cautiously in this event-driven environment. Markets are now focused on whether recent geopolitical flare-ups are isolated incidents or the start of a more prolonged geopolitical overhang. 

1. Digital Assets

Bitcoin initially shrugged off geopolitical headlines, climbing to a high of over US$108,000 on Tuesday before retreating to roughly US$104,000 later in the week as fears of a deeper Middle East geopolitical spillover resurfaced. ETH and the large-cap altcoin basket traced a similar “risk-on, risk-off” arc, reflecting the broader flight to safety that also weighed on the broader market.

Figure 2: YTD Indexed Performance – Major Digital Assets

However, beneath the surface, structural demand remained resilient. U.S. spot BTC ETFs pulled in about US$2.4B of net inflows across an eight-day streak through June 18, even as news of geopolitical instability first emerged — signaling dip-buying by long-term allocators. 

Similarly, spot ETH ETFs recorded over US$605M in net inflows during the same period. On-chain metrics also remain supportive: total ETH staked has climbed to a record 34.9M (~28.9% of supply), with over 500,000 ETH (~US$1.7B) added in the first half of June itself. This points to rising conviction in ETH’s yield potential and network security, while further reducing liquid supply.

Figure 3: The amount of staked Ethereum has reached a new high of 34.9M ETH, which represents about 28.9% of the current circulating supply

Whether the familiar “panic-then-recover” pattern re-emerges will hinge on how quickly the geopolitical narrative cools. For now, relatively modest price declines, stickiness of ETF inflows and the ongoing reduction in ETH’s tradable supply suggest that macro-driven pullbacks are still being treated as opportunities — not signs of a broader directional reversal.

Stablecoins in Focus as U.S. Senate Passes Landmark GENIUS Act

The week’s most consequential development came from Washington, as the U.S. Senate passed the GENIUS Act in a 68–30 vote — the first comprehensive federal framework for fully-reserved, AML-compliant stablecoins. Just a day later, Donald Trump urged the House to move “lightning fast”, calling the bill essential to the U.S. digital asset economy. Should the House concur, the Act would allow banks, fintechs, and even large retailers to issue dollar-backed coins under a single supervisory framework — something the market has sought for years. 

While the bill marks a significant step forward, some provisions are also prompting debate — particularly the requirement that stablecoin reserves be held with federally regulated entities and their associated criteria. These have raised questions about potential implications for crypto-native custodians, concentration of risk within the traditional banking system, as well as the growing systemic exposure to the U.S. Treasury market as stablecoin supply expands. 

The policy push arrives as stablecoin usage hits new highs. Total supply has grown 22.5% since end-2024 to over US$250B, while on-chain transfer volumes have already exceeded US$20T through June — up over US$6T versus the same period last year, highlighting rising real-world adoption. The majority of this net issuance came from USDT and USDC, which together accounted for over 77% of supply growth. But emerging models — reflected in the “others” category in Figure 4 — have also gained traction and may be poised to benefit further as the market expands.

Figure 4: Stablecoin supply rose from US$205.7B to US$251.9B over the past six months, with USDT and USDC alone accounting for over 77% of the US$46.2B net issuance

Traditional-market investors are also beginning to notice. Circle’s shares have rallied an incredible ~500% since their IPO, reflecting how strongly markets are valuing stablecoins and the prospect of regulatory clarity unlocking new institutional and payments-driven demand. Corporates are moving just as quickly: Shopify and Stripe announced in mid-June that millions of merchants can now accept USDC at checkout. Even big-box retailers are circling the space — Walmart and Amazon were reported this week to be exploring their own dollar-backed tokens as the bill advances. Large financial institutions are not far behind: on June 17, JPMorgan unveiled a pilot for “JPM-D”, a tokenized bank-deposit coin that would settle on a public blockchain.

While this regulatory progress marks a meaningful step forward, it wasn’t enough to offset the broader risk-off tone driven by geopolitical tensions — keeping overall crypto sentiment subdued despite strong adoption signals. But with policy advancing in Washington and real-world usage accelerating, momentum is finally pulling in the same direction.

2. Global Markets

Global financial markets remained on a cautious note, rattled by geopolitical tensions and shifting central bank expectations. This combination triggered an unusual dynamic: both equities and bonds came under pressure — a pattern reminiscent of last year’s turbulence.

After a strong start to June, equities reversed course. The S&P 500 slipped ~1.1%, breaking a multi-week winning streak. Globally, investors rotated into safe havens, although fixed income markets faced competing forces. Demand for safety pushed prices up, but fears of oil-driven inflation exerted upward pressure on yields. The result was a flatter yield curve, with short-end rates anchored by central bank policy and long-end rates rising on inflation expectations. 

Volatility spiked as well, with the VIX edging past 20 for the first time in weeks — signaling a pickup in hedging activity and investor caution.

Figure 5: Multi-Asset Performance – Equities, FX, Commodities, Bonds, Volatility

• Equities: 

U.S. equities gave back early June gains, with high-growth tech names leading the pullback. Profit-taking hit AI-related stocks in particular, while energy and defense outperformed on the back of rising oil prices and renewed focus on defense spending.

• FX: 

The U.S. dollar strengthened, with the DXY climbing around 0.8%. After a soft start to the month, renewed risk aversion and expectations of a higher-for-longer Fed have pushed capital into dollar-denominated assets, reinforcing its role as a safe haven during global uncertainty.

• Commodities: 

WTI crude surged to new YTD highs as markets priced in potential supply disruptions, with the Strait of Hormuz emerging as a key geopolitical flashpoint. Gold remained relatively flat, while silver broke out to a 13-year high — underscoring the broad flight to hard assets.

• Bonds: 

Credit spreads widened modestly as risk sentiment weakened and growth concerns re-emerged. The U.S. 10-year Treasury yield rose to a high of ~4.46%, up over 5 bps from the prior week, driven by rising inflation breakevens linked to the oil rally.

• Volatility: 

Market volatility spiked sharply. The VIX jumped 18.1% — its highest level in a month. Elevated VIX futures suggest expectations for continued swings ahead. For long-term investors, this reflects heightened caution, as markets brace for further geopolitical headlines and policy signals.

3. Intermarket View

Cross-asset correlations shifted meaningfully this week as markets responded to firmer yields, stronger dollar moves, and ongoing geopolitical tension. Notably, Bitcoin has extended its decoupling from traditional asset classes, with the two-month correlation with the S&P 500 falling to lows of 0.21.

Perhaps more interestingly, Bitcoin’s correlation with the DXY now stands at 0.25 — the highest among all macro pairs tracked in Figure 6. While still modest, this marks a clear shift from levels in May (~0.15) and contrasts with BTC’s historical tendency to move inversely (or remain uncorrelated) with the dollar. This rare shift suggests that BTC may currently be reacting to the same liquidity conditions supporting the dollar rather than acting as a hedge against it. 

Meanwhile, the negative correlation with the US 10Y (–0.33) reinforces the inflation-hedge narrative — BTC gained even as yields climbed on oil-driven inflation fears and higher-for-longer rate expectations.

Figure 6: BTC 2M Correlation Matrix (vs ETH, S&P 500, Gold, DXY, US 10Y)

This divergence is even more visible in short-term dynamics. Bitcoin’s rolling 30-day correlation with the S&P 500 has largely trended downwards since late May, implying that as equities sold off, BTC often rallied. This stands in contrast to Q1, when Bitcoin traded more like a high-beta equity proxy.

At the same time, the BTC–Gold correlation has continued to drift slightly lower, remaining in a mildly negative range. This behaviour suggests that, despite overlapping narratives, Bitcoin and gold have been absorbing macro flows differently — likely driven by Bitcoin’s higher volatility, more speculative positioning, and greater sensitivity to liquidity shifts.

Figure 7: Bitcoin’s Rolling 30D Correlation with S&P 500 and Gold Shows Broad Divergence in Recent Weeks

For now, Bitcoin is showing low-to-negative correlation with both equities and gold, a low positive correlation with the dollar, and an inverse relationship with bond prices. While such correlation regimes are often short-lived, the current setup underscores crypto’s growing role as a distinct asset — offering meaningful portfolio diversification in a landscape dominated by macro-driven positioning.

Macro Outlook: Fed Holds Steady, But Caution Grows

The Fed held rates steady for the fourth consecutive meeting — an expected move, but one that came with a more cautious tone. The key surprise lay in the June “Summary of Economic Projections”, where the dot plot edged further hawkish. While the median still implies two 25 bps cuts in 2025 (leaving the year-end rate at 3.9%), the distribution behind that median shifted: 7 of the 19 participants now see no cut at all this year, and another two see only one cut. In March, just 4 officials expected no cuts. One more dot above 3.875% would shift the median to imply just a single cut, underscoring how close the Committee is to a higher-for-longer stance.

Figure 8: June Dot Plot Shows a Moderately Hawkish Shift as More Fed Officials Project No Cuts in 2025

Fed Chair Powell acknowledged the change in tone, repeating that policy is “data dependent” but conceding that the balance of risks has moved toward persistent inflation. That admission is consistent with the Fed’s own softening projections: headline PCE inflation for end-2025 was nudged up to 3.0%, core PCE to 3.1%, and the first return to the 2% target was pushed out to 2028. Growth expectations, by contrast, were trimmed again (the 2025 GDP forecast now just 1.4%), while the unemployment projection drifted up to 4.5%. 

Incoming data help explain this cautious stance. May CPI slowed to about 3% year-on-year (YoY) — its slowest pace in over two years — thanks to base effects and cooling goods prices. However, core CPI (excluding food and energy) remains stubborn at ~3.8%, highlighting sticky service-sector inflation and wage pressures. Officials warn that tariffs and the recent oil spike could feed into future inflation, even as current data suggests moderation. The Fed is also watching the labor market for any notable movements. So far, it remains resilient on the surface, with unemployment at 3.8%, but forward-looking indicators — such as falling job openings and weaker temp hiring — point to gradual softening. This, combined with trade uncertainty and geopolitical volatility, complicates the Fed’s policy path.

Meanwhile, global monetary policy is also beginning to diverge. While the ECB has begun cutting rates in response to slower growth, both The Fed and the BoE, by contrast, have been constrained by persistent domestic inflation, which may keep rates higher for longer. This divergence could strengthen the dollar in relation, exporting disinflation abroad but putting pressure on emerging markets with dollar-denominated debt.

The Week Ahead

Looking ahead, markets will digest a somewhat quieter macro week but remain sensitive to any unexpected headlines — be it geopolitical developments (ceasefire or spillovers abroad), surprise earnings updates, or regulatory news in crypto. With the Fed now in data-dependent mode, each incoming economic release will be scrutinized for clues on growth and inflation.

Investors should continue to watch regulatory signals (such as further stablecoin bill outcomes and any hints from the SEC on pending ETF applications) and continue to track the correlation break between digital assets and equities.

Figure 9: Key Macro and Crypto Events for the Week of June 20–June 26, 2025