In the past two months, we have been explaining that the biggest influences on the risk market are the U.S. tariffs and monetary policy. Of course, the pressure from Powell and the proposals for candidates for the Federal Reserve Chair also contribute to market volatility. In the last week of July, the tariff issue can finally be seen as having reached a temporary conclusion. Starting in August, the impact of tariffs on inflation will gradually become apparent.
Looking at the tariffs from some important trading countries, Trump has basically adhered to an overall tariff of 15% to 20%, which includes both basic tariffs and reciprocal tariffs. This figure is significantly lower than the tariffs announced by Trump at the beginning of the year and is generally considered to have a smaller impact, especially since almost all major trading countries with the U.S., except for China, have reached agreements. The agreement with the European Union is seen as a preliminary end to the tariff adjustment phase.
As for China, although it was reported last week that an additional 90-day pause would be granted, and China has agreed, a statement from Bessent early Wednesday indicated that whether to grant China a second 90-day pause still requires Trump's approval. If Trump does not approve, it may revert to pre-pause levels. Although this statement caused short-term panic in the market, it is generally believed that the U.S. and China will still enter a pause phase, especially since the U.S. has temporarily frozen restrictions on technology exports to China.
Additionally, regarding tariffs on India, Trump indicated that there is a high possibility of imposing tariffs of 20% to 25%. Trump also issued an "ultimatum" to Russia, stating that if Russia does not cease fire with Ukraine within the next 10 days starting today, stronger tariffs will be imposed on Russia, along with secondary sanctions on Russian oil. Bessent also informed Chinese officials that, given the U.S. legislation on secondary tariffs on sanctioned Russian oil, if China continues to purchase, it may face high tariffs.
The U.S. has begun to take the situation with Russia seriously. If the war between Russia and Ukraine can truly end, it would help alleviate inflation in the U.S. However, from the current situation, the likelihood of a ceasefire remains low, which also reflects the urgency of the U.S. demand for rare earth minerals.
In terms of monetary policy, although Trump made headlines again with his attacks on Powell at the beginning of the week, after visiting the Federal Reserve building and having direct conversations with Powell over the weekend, Trump's aggressive stance towards Powell has significantly decreased. He even stated that firing Powell would be a big deal and that there is currently no need to do so, expressing confidence that Powell will do the right thing and describing Powell as a very good person. It seems Powell may be preparing to cut interest rates.
Regarding candidates for the Federal Reserve, Trump mentioned that there might be three candidates. According to the prediction data from Kalshi, the top candidate remains Waller, who is a former Fed governor and has some influence within the Fed. The second candidate is Hassett, who has moved up from third place, swapping positions with Waller, mainly because Trump did not respond to Waller's public statements, significantly reducing Waller's chances of being selected. However, Waller's biggest advantage is that he is currently a Fed governor.
Currently, Trump has not announced any candidates, but it is likely that he will do so around the July meeting to pressure Powell and the Federal Reserve Board. Although Trump has shown goodwill again, Powell has still expressed that he will never resign and vows to stick it out until the last moment.
Although there were no significant macro data releases in the past week, the upcoming week will be a period of macro data explosion. First, the U.S. second-quarter GDP will be released on Wednesday night, with a previous value of -0.5% and market expectations of 2.4%. The GDPNow forecast is slightly higher at 2.9%, indicating a strong rebound in the U.S. economy from the technical contraction or extremely low growth of the previous quarter. Both nominal growth and seasonally adjusted annualized growth have significantly improved, suggesting a clear recovery in economic momentum and a rebound in corporate and consumer spending.
The main reason is that the increase in net exports offset the decline in U.S. private domestic investment growth, meaning the U.S. economy is likely performing better than market expectations. The primary reason is that U.S. exports have increased during the tariff pause compared to the first quarter, while the decline in the first quarter was also due to tariff expectations.
However, this may not be good news for the Fed's interest rate cuts, as the strength of the U.S. economy is evident. The newly imposed tariffs will inevitably impact inflation, and the economic upturn gives the Fed more confidence to observe for a longer period. Additionally, job openings and small non-farm payroll data will be released before the meeting, with non-farm payroll data coming out the day after the meeting. From the currently released job openings data, the published value is lower than the previous value, and the small non-farm payroll data expectation has improved from -3.3 last month to 7.5, indicating a decline in job openings while private employment numbers are rising significantly.
However, the expectations for non-farm payroll data are contrary to those for small non-farm payrolls, with an anticipated unemployment rate rising to 4.2%. Overall non-farm employment is expected to decrease significantly compared to last month. If the non-farm data expectations are slightly favorable for the Fed's monetary policy adjustments, a single month's data does not significantly impact the Fed's judgment. Even if the unemployment rate rises to 4.2%, it remains a relatively low level, and only exceeding 4.3% would increase pressure on the Fed.
At this stage, the likelihood of economic improvement is high, as the expectations for non-farm payrolls indicate that both annual and monthly labor wages are rising. Given the relatively stable U.S. economy and employment data, the probability of the Fed choosing to cut interest rates is low. The market's speculation about a rate cut in September is largely driven by Trump's pressure on Powell and the pressure from candidates for the Fed Board.
Nick has already stated that there will be no rate cut in July, which is almost certain. The market is no longer considering a rate cut in July, but the probability of a rate cut in September has increased by 6% compared to last week. This increase is not due to expectations of declining inflation but rather due to Trump's pressure on the Fed. Therefore, the main speculation in the market now is whether Powell will make dovish remarks when answering reporters' questions, especially regarding the September rate cut. As long as he does not take a hardline stance and does not insist on waiting for data, even a vague consideration of a September rate cut would increase market expectations for such a cut.
On the night after the meeting, the U.S. June PCE data will be released. The expectations for this data are not very friendly. Except for the core PCE annual rate, which is expected to be the same as the previous value, other PCE and core PCE data are expected to be higher than the previous values. Even the data provided by the Cleveland Fed is similar, slightly higher than the previous values. This indicates that inflation in the U.S. is already showing signs of difficulty in declining before the full implementation of tariffs, and this is only under the basic tariff conditions. The increase in comprehensive tariffs starting in August is likely to have a greater impact on inflation.
Based on the current economic data, the probability that the Fed will not cut rates in September is higher, as inflation has not decreased comprehensively and may even rise. This will depend on the game between Trump and the Fed. Inflation data may start to rise continuously from September, and it is not ruled out that it may only return to a downward path in 2026. If this is the case, a second rate cut in 2025 may also be quite difficult, and if it occurs, it may be in December 2025.
This week, in addition to the macro data mentioned above that could impact cryptocurrencies, $MSTR and $COIN will also release their second-quarter financial reports on Friday. These two data points are likely to have some impact on Bitcoin's price. From the current expectations, the rise in BTC prices has boosted MSTR's profits, which is significantly better than the first quarter. Additionally, the rise in ETH prices, large purchases by ETF investors, and Circle's listing will enrich Coin's financial report. If the financial reports from these two companies are good, it will provide a boost to BTC and the overall cryptocurrency market.
In the early hours of Wednesday, Beijing time, the SEC suddenly announced the approval of physical redemption for BTC and ETH spot ETFs. This is the most significant "institutional upgrade" of the U.S. regulatory framework for crypto assets following the approval of spot ETFs, meaning BTC and ETH have officially gained equal status with mainstream assets like gold, completing the "last piece of the puzzle" for global institutional compliance in crypto asset allocation.
SEC Chairman Paul S. Atkins stated that the regulatory concept is shifting towards a framework that adapts to the crypto market, advocating for the establishment of a suitable and reasonable regulatory framework for the crypto asset market. The physical redemption mechanism will reduce ETF costs, improve efficiency, and benefit all investors.
This indicates that the SEC is transitioning from defensive regulation to constructive regulation and recognizes that BTC and ETH belong to commodity-like assets, which should be treated similarly to commodity-type ETPs. This not only significantly reduces the selling pressure risk during cash redemptions but also allows authorized participants (APs) to conduct arbitrage operations more efficiently. ETF prices will be closer to spot prices, providing institutions with a compliant, safe, and withdrawable allocation channel. Coupled with the FASB's fair value accounting system, it will be smoother for companies and financial institutions to indirectly hold BTC or ETH through ETFs in the future. This will both increase institutional entry willingness and further lock in the spot circulation, representing a structural institutional upgrade with far-reaching implications.
Additionally, last week, the main influence on Bitcoin prices was the selling by ancient whales. Unlike the previous two weeks, last week, 80,000 BTC from ancient whales were indeed sold through Galaxy, and it was clear that some of the BTC was transferred to four exchanges: Binance, OKX, Bybit, and Coinbase. As of now, although prices have mostly recovered and the market has digested this whale sell-off, on-chain data shows that new ancient whales are still stirring. Although only a few hundred BTC have moved so far, some unfriendly data can still be seen from the exchange's inventory data.
From the overall exchange inventory data, it does show that the BTC entering exchanges, whether from ancient whales or not, has not only been digested but is also continuously decreasing, indicating that investor buying sentiment remains strong. The ancient whale sell-off appears to have been absorbed by the market, and the decrease in exchange inventory reduces the risk of a price crash.
However, looking at more detailed data, the situation is not so optimistic. As mentioned earlier, part of the sales by this whale was realized through Binance, OKX, Bybit, and Coinbase. Although the total exchange inventory has indeed decreased, it is evident from the data of these four exchanges that, except for Coinbase, the BTC inventory in the other three exchanges does not show a significant downward trend. Currently, it is estimated that about 24,000 BTC entered the exchanges during the ancient whale movement.
The largest inflow was to Binance, with approximately 12,000 BTC, and there are still over 10,000 BTC remaining. OKX saw an inflow of around 4,000 BTC, with less than 3,000 BTC still remaining. Bybit had an inflow of about 3,000 BTC, and there are still around 3,000 BTC left. Coinbase received less than 5,000 BTC, and not only has it fully digested this amount, but it has also withdrawn a significant amount of BTC from the exchange.
Therefore, we can see that there are still over 15,000 "extra" BTC remaining on the exchanges that have not been digested. These three exchanges still have the potential for sell-offs, indicating that, compared to non-U.S. dominant exchanges, Coinbase, which primarily serves U.S. investors, is currently the leader in purchasing power. U.S. investors and those in U.S. time zones remain the main force in buying.
Last week, we also analyzed the price trends of ETH and its correlation with the Russell 2000. After a week of changes, we can still see that both maintain a high level of consistency. This supports our ongoing inference that investors are engaged in sector rotation. Although many funds hope to drive the emergence of altcoin season through the rise of ETH and small-cap stocks, the lack of liquidity and the tightening monetary policy have prevented a significant shift in investors' risk appetite.
Thus, the difficulty of sector rotation remains considerable. The only difference is that we can indeed see significant capital entering the ETH spot ETF through primary and secondary market data. Even though purchasing power in the primary market has decreased this week, the trading volume in the secondary market remains high. Unlike BTC's IBIT, ETHA's trading volume far exceeds the volume at the end of 2024, indicating that current ETF investors still have strong interest in ETH. If supported by the SEC's physical delivery and BlackRock's ETH staking, there is still some imaginative space.
However, for most altcoins, even if ETH's price rises, the lack of sufficient overflow capital and liquidity makes it difficult to bring about sector rotation, let alone an altcoin season. Especially since most ETF investors, even if they take profits, may not choose to invest in altcoins.
Next, regarding the BTC and ETH holding data from the past month, both show that high-net-worth investors have been increasing their holdings in the past week. However, there is a difference: in BTC data, small-scale investors holding less than 10 BTC have also shown signs of increasing their holdings, indicating that BTC's stability has attracted many retail investors. In contrast, investors holding less than 1,000 ETH have consistently shown signs of selling, with more ETH flowing into the hands of high-net-worth investors and ETF investors.
Finally, we look at the URPD data, which is our most important support reference. Currently, the stable support levels are between $93,500 to $98,500 and $103,500 to $108,500. The former has higher stability; as long as there is no systemic risk, it is unlikely to fall below this level for an extended period. The latter still has many short-term investors who have not undergone sufficient washing out, but as this group gradually shifts to long-term investors, stability will also improve.
Additionally, the $117,000 level is currently the highest price point with significant inventory, indicating a high consensus at this level. Unless there is a major negative factor, this level has strong attraction. My several trades have been around this price, and it is evident that even if it dips below, it quickly returns above $117,000. It is also important to note that there is still a gap at the $112,000 level. Last week, the gap at $114,000 was filled, but the one at $112,000 remains unfilled. URPD gaps have never gone unfilled; it is just a matter of time.
In summary, the focus in recent times has been on tariffs and monetary policy. With July coming to an end, tariffs are nearly resolved. If China can extend the pause for another 90 days, considering the current market's ostrich mentality, it can be seen as a positive. The next phase of speculation will shift to monetary policy and Powell's candidates. After resolving Trump's tariffs, he is likely to address this issue. There should be a significant opportunity for Trump to announce a preliminary candidate in August. If the Fed cannot pursue a loose monetary policy in September, Trump will likely apply pressure on the Fed through the "candidate."
Additionally, the strategic reserves of cryptocurrencies in U.S. stocks have been increasing, but most may just be a facade. Few can truly reach the level of MSTR. Currently, only BTC and ETH appear to be relatively stable, while BNB's 10X potential is greater due to YZI's direct involvement. Other altcoins, especially, may find it more challenging.
Related: Ethereum's 10th Anniversary: Wall Street's Top Firms Focus on the Crypto Market and ETH Holders
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