Kevin Warsh just took over as Fed Chair. His first FOMC meeting is June 16. And his own central bank is publicly arguing about whether he should cut rates or hold them.

Christopher Waller — sitting governor, Powell's guy — gave a speech in Frankfurt calling rate cuts "just kind of crazy." The data backs him up. CPI up 0.6% in April. Manufacturing input prices jumped from 59 to 84.6 in three months, matching pandemic-era supply-chain stress. PCE inflation estimated at 3.8% year-over-year, a three-year high. The Fed has missed its 2% target for six straight years. Waller thinks one more shock could permanently break the public's belief that prices will ever come down.

Warsh sees it differently. He thinks AI is creating a deflationary wave that the Fed's 1978-era models cannot see. The cost of running frontier AI dropped from $30 per million tokens in early 2023 to pennies today.

He points to the 1990s, when Greenspan held rates steady through the internet boom and inflation dropped to 1.9% while productivity surged. Same bet, different decade.

The whole fracture hinges on one geographic chokepoint: the Strait of Hormuz, where 20% of global oil flows. The US launched fresh strikes in southern Iran over the weekend despite ongoing peace talks. If the Strait stays disrupted, oil stays elevated, and Waller's data wins. If it reopens, the energy shock washes out and Warsh carries the room.

Tomorrow's PCE print is the tiebreaker. It is the Fed's preferred inflation gauge and it lands directly into this open fracture. A hot number extends the macro ceiling that has kept BTC below $80K for a month — rate cuts get pushed deep into 2026, and institutional capital stays parked in bonds yielding 5%. A cool number reopens the door. We track eight conditions that drive crypto's macro environment. Six point the same direction right now. Tomorrow decides whether that changes.

Coin Metrics just published the forensic breakdown of what happened inside Aave's lending pools during the KelpDAO exploit. The numbers are stark.

When the attacker deposited unbacked rsETH and borrowed 126,000 WETH across four transactions, the pool's liquidity buffer was already thin — only 11%. Available ETH collapsed from 350,000 to near zero in two hours. Borrow rates tripled overnight from 2.3% to 8.7%.

Then it cascaded. Stablecoin pools hit 100% utilisation. USDT liquidity fell over 60% in about an hour. Over $2 billion in stablecoin liquidity drained in 24 hours. Total Aave deposits dropped from $34.5 billion to $18.8 billion.

The lesson is not about Aave specifically. Pooled lending means collateral risk in one market transmits across all of them. One bad token crashed the whole system.

Glassnode's Week 22 data landed and it confirms what the chart was hinting.

BTC fell from $79K to $74K before rebounding toward $77K. Price momentum declined 21.7%. Spot volume dropped 10%. Futures open interest fell 3.5%. The cost basis that supported Bitcoin on the way up has flipped to overhead resistance.

The dangerous part: the cost of holding leveraged long positions surged 135.4%. Traders are paying record premiums to bet on a rebound in a market where the actual buyers have left. ETF flows improved slightly but trade volume fell 23%.

Tomorrow's PCE and Thursday's post-holiday ETF flows are the two things that break this stalemate. Until then, the bounce from $74K looks like a pause, not a reversal.

Of course, none of this is financial advice.