This week’s Fed Minutes confirmed what markets had long suspected: the January meeting was a hawkish hold. The committee sees no urgency in cutting rates, with the predominant view being that additional policy easing may not be warranted until disinflation is firmly back on track.

PCE inflation for January came in at 0.4% — above the 0.3% consensus — with services still the dominant contributor. Tariff pass-through into core goods is increasingly cited as a risk factor.

To complicate matters further, Advance GDP for Q1 printed at 1.4%, well below the 2.8% consensus. Even accounting for the ~1% drag flagged by the Fed related to government spending, the shortfall exceeded market expectations. The combination of sticky inflation and decelerating growth raises the spectre of stagflation — a historically difficult environment to navigate for most asset classes.

Legislative uncertainty: CLARITY Act without a clear path

The CLARITY Act, the key US crypto market structure bill, remains deadlocked in the Senate. The central dispute revolves around stablecoin yield: banks want it prohibited, while the crypto industry — led by Coinbase’s Brian Armstrong — wants it preserved. A March 1 deadline has been set for both parties to reach agreement, with Senate passage targeted for April. Polymarket odds currently stand at around 75%, down from a peak of 85-90% earlier this month.

Portfolio implications

Short-term, the macro and legislative environment offers little immediate support for digital assets. However, if growth continues to deteriorate while inflation gradually cools, expectations for a Fed pivot could shift — a scenario that has historically been a tailwind for bitcoin and risk assets more broadly. 

For more news, information, and strategy, visit the CoinShares Crypto ETF Hub.