The Market Questions Fed Credibility As Walsh Talks Tough But Holds Rates

Jesse Marre on a confused FOMC reaction, a steepening curve, a fragile Iran talks headline, a Coldcard hack, and CLARITY odds down to 30 percent

Bitcoin remains range bound after a confusing FOMC meeting in which the Fed held rates despite three dissenters voting for a hike, while Chair Walsh talked tough on the 2 percent inflation target without hiking. The market response was a loss of confidence rather than reassurance, and long end yields broke out to new highs before a Trump claim of a Strait of Hormuz peace framework knocked oil down ~$10. CLARITY Act odds for 2026 passage have slipped to 30 percent with the ethics provisions still unresolved and this week the last chance before recess. A hack on the Coldcard hardware wallet drained roughly 90 million dollars and further dents the bitcoin self custody narrative.

FOMC Holds Rates But Leaves The Market Confused

The Fed held rates at Wednesday's meeting, but three officials, Kashkari, Logan and Hammack, dissented in favor of a 25 basis point hike. Chair Walsh went out of his way to sound hawkish on the 2 percent inflation target, saying there is no hidden band of comfort around the target and that the Fed will do whatever it takes to hit it. The market did not believe him. The immediate reaction was skepticism: if the Fed is so determined to hit 2 percent, why did it not hike when inflation data has run above target for the better part of a year. Confidence in the Fed's resolve fell, and the probability of a September hike dropped as the market questioned Warsh’s hawkish rhetoric. Lack of clarity, not lack of hawkishness: Walsh said the Fed is watching a range of inflation metrics beyond the headline numbers but did not specify which ones. The market was left without a clear trigger or read for future hikes, which is what unsettled sentiment more than the hold itself.

Curve Steepens As Long End Does The Fed's Work

Walsh argued that rates had already effectively moved because the market pushed long term yields higher between meetings, meaning the long end was doing the hiking work for the Fed. That logic left traders wondering whether the Fed would actually move the Fed funds rate at all if long yields kept rising on their own. The result was a steepening curve: lower odds of a September hike priced alongside higher long run inflation risk premium and hikes further out. Equities did not like the outcome and sold off on the day. Jesse Marre I think the most likely read on this is that Walsh doesn't want to hike rates, both because of his belief in the deflationary backdrop of AI and the tacit agreement with the presidency when he got the role. He's hoping inflation prints keep coming down so the Fed doesn't need to hike at all.

Inflation Data Keeps Softening In The Background

Behind the FOMC noise, the underlying data continues to soften. PCE came in at 3.7 percent year over year against 4.1 percent previously, in line with expectations, while core PCE printed a tenth lower than expected at 3.4 percent against 3.5 percent expected and 4.4 percent previously. GDP was also weak at 1.5 percent quarter over quarter against 2.1 percent expected, and Michigan five year inflation expectations held steady at 3.3 percent. CPI, PCE and PPI have all been coming in lower, break-evens are lower, and survey data has been declining. The truflation index now sits at 2.1 percent and the trimmed mean at 1.7 percent, both essentially on target. Indicator Actual Expected Verdict PCE (YoY) 3.7% 3.7% In line, down from 4.1% Downside miss Core PCE (YoY) 3.4% 3.5% GDP (QoQ) 1.5% 2.1% Weak miss U. Mich 5yr inflation exp. 3.3% 3.3% prev. Steady On target True inflation index 2.1% - Trimmed mean On target 1.7% - Source: Hilbert Trader’s Call 3 August 2026

Long End Yields Break Out To New Highs

Following the Fed meeting, long end yields broke out, with the 30 year climbing to a new high of 5.2 percent and the 10 year at 4.7 percent. As has become routine every time yields spike, President Trump then claimed a peace deal framework, this time one that would result in full opening of the Strait of Hormuz. Oil prices dumped roughly 10 percent on the headline, with Brent crude falling to about 82 and a half. Iran then denied any substantial talks had taken place with the US, though it confirmed ongoing and near conclusion discussions with Oman over management of the Strait. Active bombing campaigns from both sides have paused for now, though there is no resolution in sight. Headline driven, not resolved: The oil move was triggered by a claimed framework that Iran partially denied. The more credible thread is the Oman-mediated talks on Strait management, which are reportedly near conclusion, but this remains a fragile, headline sensitive situation.

CLARITY Act Odds Slip To 30 Percent In Final Week

The CLARITY Act remains stuck on ethics provisions, with some parties still objecting to the yield offered on stablecoins. Odds of 2026 passage have fallen to 30 percent, having dipped into the low 20s over the weekend before recovering slightly on a headline that Republicans are weighing a counter offer to the Democrats' ethics proposal. There will be no vote today, but this week is the last chance to get the bill done before recess, so a resolution one way or another is expected by Friday. As with most political negotiations, the outcome is likely to stay uncertain until the final hours. Last week before recess: Odds at 30 percent, down from previous weeks, but a Republican counter offer on ethics provisions keeps the door open. No vote is scheduled today; watch for headlines through the week as this is now binary before recess.

Coldcard Hack Undermines Self Custody Case

Weekly Bitcoin ETF flows were negative 60 million dollars, continuing a month of largely flat flows. The notable Bitcoin news was a hack of the Coldcard hardware wallet, historically considered one of the most cypherpunk and security focused Bitcoin only wallets on the market. The randomness source used to generate seed phrases was found to be flawed deep in the code, allowing an attacker to recreate seed phrases and drain wallets without the devices ever connecting to the internet. The hack totals roughly 90 million dollars so far, immaterial in Bitcoin terms, but it further undermines the practicality of self custody for regular users, a dynamic Jesse expects to push more users toward ETF issuers and regulated exchanges like Coinbase over time.

Bitcoin Range Bound, Long Way From A Bull Breakout

Bitcoin remains technically range bound, with short term resistance at 67,500 and support at 58,000. The bigger long term pivot required to confirm a proper bull market breakout sits around 85,000, a long way from current levels. On a downside break, the first target is 50,000, followed by the mid 40,000s. Hilbert's six factor CLI reads -1.57, up 1.02 on the week, and the Global Liquidity Index is at 5.98, indicating moderate liquidity without a breakout in either direction. In USDe, yield stands at 3.95 percent with 3.9 billion dollars in circulation, down 100 million on the week. BTC level Significance 85,000 Long term pivot for bull market breakout Short term resistance 67,500 58,000 Short term support 50,000 First downside target on a break Mid 40,000s Second downside target Source: Hilbert Trader’s Call 3 August 2026 intended for professional and institutional investors only. Hilbert Group AB is listed on Nasdaq First North Growth Market.