July Market Outlook: Impact of Trump Policies and Market Calm Period

The market is in a calm period, with trading volume dropping to a 9-month low and volatility reaching a 21-month low. This suggests that despite several important events in July, the market may still enter a summer slowdown phase.

The past four Julys have been accompanied by significant events, yet prices have remained stable. Traders seem more willing to enjoy the summer rather than focus on trading operations. Will this year be different? Let's take a look at the main highlights of July.

July Outlook: Another Calm Summer?

Several important events are worth paying attention to in July, among which Trump's series of actions may have a significant impact on the market:

1. Budget Proposal: Trump is set to sign a controversial budget proposal on July 5. This bill could increase the U.S. deficit by $3.3 trillion. An expansionary fiscal budget is favorable for scarce assets like Bitcoin, but this benefit may be overshadowed by tariff issues.

2. Tariff Issues: The 90-day tariff exemption period will end on July 9. Trump is expected to make more comments on the tariff issue, and the effects of the new tariffs will gradually become apparent throughout the month. Reflecting on the experience from February to April, tariff uncertainty can easily suppress market sentiment, negatively impacting Bitcoin.

3. Cryptocurrency Policy: July 22 is the deadline for the latest cryptocurrency executive order. By then, the task force must submit a report recommending legislative and regulatory frameworks and assess the United States' digital asset reserves. Although the previous "Strategic Bitcoin Reserve" order has expired, relevant decisions and announcements may still be made at any time.

These events could all affect the Bitcoin trend, depending on which factor dominates: fiscal expansion or trade uncertainty. Additionally, the liquidity reduction caused by the July 4th Independence Day holiday in the United States may increase recent market uncertainty.

Market Sentiment Analysis

Trump's actions will undoubtedly stir the market. In the six months since he took office, global uncertainty has increased, leading to a more sluggish market, especially in the cryptocurrency sector. In terms of funding rates, open interest, leveraged ETF exposure, trading volume, and options skew, the current market's risk appetite is quite moderate, presenting a completely different structural state compared to past bull markets.

This suppressed risk appetite can be seen as a positive signal for Bitcoin's future. Limited euphoria means that if the subsequent market improves, the liquidation risk will also be lower. Currently, there is no reason for the market to undergo large-scale deleveraging, and the overall leverage level remains controlled, which is more suitable for continuing to hold spot and maintaining patience during this seasonally weak market.

Historical Review and Outlook

Looking back from 2021 to 2024, July is the second least active month of the year in terms of trading volume, despite the fact that July in recent years has been filled with significant news:

• July 2021: After China banned Bitcoin mining, the price of Bitcoin plummeted to its annual low.
• July 2022: Three Arrows Capital and Celsius enter bankruptcy proceedings.
• July 2023: Relatively calm, but a large asset management company submitted a Bitcoin ETF application.
• July 2024: Mt. Gox begins asset distribution, the German government sells Bitcoin, Trump survives an assassination attempt and attends the Bitcoin conference, Biden withdraws from the presidential race.

In the current market environment, where there are no signs of overheating, continuing to hold spot positions and maintaining patience may be a more prudent strategy.

Market Data Analysis

spot market performance

Spot market trading activity further weakened over the past seven days, with the daily average trading volume falling by 34% from the previous week to $2.18 billion, marking a new nine-month low. This sluggishness is primarily driven by a narrow consolidation range and a relatively calm news environment.

The Bitcoin spot trading volume fell to its lowest level since September of last year in June, continuing the generally sluggish trading trend of the summer. Historical data shows that June to October accounts for only 43% of the year but contributes only 32% of the annual trading volume. Historically, July and September are usually the lightest months of the year.

Volatility has also shown a similar pattern. The 7-day volatility has dropped to 0.79%, the lowest point in 21 months. It is worth noting that in the past year, the longest consecutive duration of such low 7-day volatility (below 1%) has only been two days, indicating that more substantial market fluctuations may occur in the short term.

Despite the weak price trend, the capital flow is strong. The Bitcoin ETP recorded a net inflow of 18,877 BTC in the past week, mainly due to significant capital inflow from the U.S. spot ETF. However, the strong capital inflow sharply contrasts with the stagnant prices, indicating considerable selling pressure in the market.

Therefore, despite the presence of multiple potential market catalysts in July 2025, the market may still linger in a state of low trading volume and low volatility, entering a typical summer slump according to past patterns.

Derivatives Market

Overall, the low futures premium on a certain trading platform, limited capital flow in leveraged ETFs, and the low leverage and moderate yields in the perpetual contract market all indicate that the market squeeze driven by leverage poses limited risk in the short term.

• Futures Market: A cryptocurrency futures trading platform has seen lackluster performance over the past week, with traders avoiding new directional positions. The annualized premium for Bitcoin futures remains weak, hovering around 7-8%.

• Leveraged ETF: The activities of leveraged ETFs have also been moderate, with small outflows of funds continuing since last Thursday, indicating that the market's low-risk preference remains solid.

• Perpetual Contracts: The perpetual contract market also reflects the same cautious sentiment. The average annualized funding rate over 7 days is only 2.5%, well below the neutral level of 10.95%. This indicates a continued lack of willingness in the market to establish new long positions.

• Options Market: Due to prolonged price consolidation and reduced trading activity, the market's demand for directional bets has weakened, and the term structure slope has tended towards neutrality. At the same time, the long-term consolidation has compressed implied volatility to a new annual low, and the market expects the summer trend to continue progressing slowly.

The rise of the altcoin derivatives market

Over the past year, the relative leverage ratio of the altcoin market has risen sharply. The open interest of its perpetual contracts relative to market capitalization has nearly doubled, increasing from 3% on July 1st of last year to 5.6% today, indicating that leveraged trading of altcoins is much more active compared to a year ago.

However, despite the steady increase in the holdings of altcoins, the funding rates of altcoins depict a cautious market landscape. In November/December of last year, when market sentiment was high, the average funding rate of the top five altcoins by market capitalization reached as high as 60%. However, in the first half of this year, their funding rates have been approaching or even falling below the level of Bitcoin, indicating a risk-averse sentiment. The phenomenon of stable growth in holdings coexisting with moderate funding rates suggests that the position strategies across the entire market are quite restrained.