July Market Outlook: Intertwined Policy Effects and Seasonal Factors, Market May Continue "Summer Weakness"

The market has recently entered a period of calm, with trading volume dropping to a 9-month low and volatility reaching a 21-month low. This state suggests that despite a series of significant events in July, the market may continue the trend of slowing growth seen in the summer.

Experience over the past four years indicates that significant events occur every July, yet prices tend to remain stable. Traders seem more inclined to "enjoy life" during this month rather than closely monitor the market. Will this year be any different? This question is worth our contemplation.

July Outlook: Another Quiet Summer?

In July, a series of important events will unfold one after another, among which the policy developments may have a significant impact on the market:

1. Budget Proposal: The new budget proposal signed on July 5 has sparked controversy due to its expansionary nature, potentially increasing the U.S. deficit by $3.3 trillion. This could be positive for scarce assets like Bitcoin, but its impact may be overshadowed by other factors.

2. Tariff Issues: The 90-day tariff exemption period will end on July 9, and the impact of the new tariffs will gradually become apparent throughout the month. Reflecting on earlier experiences this year, tariff uncertainty tends to suppress market sentiment, negatively affecting Bitcoin.

3. Cryptocurrency Policy: July 22 is the deadline for the latest cryptocurrency executive order, by which relevant working groups must submit reports with recommendations on legislative and regulatory frameworks. Additionally, information regarding the number of Bitcoins held by the U.S. government and future procurement plans may be announced around this time.

These events could all affect the price movement of Bitcoin, depending on which factor dominates: fiscal expansion or trade uncertainty. Additionally, the U.S. Independence Day holiday at the beginning of July may lead to reduced market liquidity, increasing short-term uncertainty.

Market Sentiment Analysis

Recent policy trends have triggered uncertainty in the market. From indicators such as funding rates, open interest, leveraged ETF exposure, trading volume, and options skew, the market's risk appetite is quite mild, which stands in stark contrast to Bitcoin approaching its historical highs.

This suppressed risk appetite can be seen as a positive signal. Limited exuberance means that if the subsequent market warms up, 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 positions and maintaining patience during this seasonal downturn.

Historical pattern or new breakthrough?

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

• In July 2021, after China banned Bitcoin mining, the price of Bitcoin plummeted to its annual low.
• In July 2022, Three Arrows Capital and Celsius entered bankruptcy proceedings.
• Although 2023 has been relatively calm, BlackRock submitted a Bitcoin ETF application.
• The year 2024 will be particularly tumultuous, including the distribution of assets by Mt. Gox, the German government's sale of Bitcoin, and a series of political events.

In the current environment lacking signs of market overheating, continuing to hold spot positions and maintaining patience may be a more prudent strategy.

In-Depth Analysis of Market Data

Spot market performance

Trading activity in the spot market further weakened over the past week, with the average daily trading volume declining by 34% compared to the previous week, dropping to $2.18 billion, marking a new low in nearly nine months. This sluggishness is mainly driven by a narrow price range and a relatively calm news environment.

The Bitcoin spot trading volume dropped to its lowest level since September 2024 in June 2025, continuing the generally sluggish trading trend of summer. Historical data shows that while June to October only accounts for 43% of the year, it contributes only 32% of the annual trading volume. July and September are typically the quietest months of the year.

Volatility has also shown a similar pattern. The 7-day volatility has dropped to 0.79%, the lowest point in nearly 21 months. It is noteworthy that in the past year, the longest consecutive duration of such low 7-day volatility was only two days, indicating that there may be larger price fluctuations in the short term.

Despite weak price movements, capital flows have performed strongly. Bitcoin ETP recorded a net inflow of 18,877 bitcoins in the past week, setting a record for the strongest single-week capital inflow in recent times. However, the strong inflow of capital contrasts sharply with stagnant prices, indicating significant selling pressure in the market.

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

Derivatives Market

Overall, the low CME futures premium, limited capital flow in leveraged ETFs, and the low leverage and moderate yields in the perpetual contract market indicate that the risk of a leveraged-driven market squeeze is limited in the short term.

• CME: CME cryptocurrency futures have performed flat 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 mild, with small outflows of funds occurring continuously since last Thursday, indicating that the market's low-risk preference remains solid. In the past week, CME's open interest decreased by 2,105 bitcoins, mainly because traders held June contracts worth 8,960 bitcoins until expiration.

• Perpetual Contracts: The perpetual contract market also reflects the same cautious sentiment. The 7-day annualized funding rate averages only 2.5%, well below the neutral level of 10.95%. The open interest for Bitcoin perpetual contracts remains far below the peak in May, essentially stagnating at 266,000 Bitcoins.

• Options Market: In the Bitcoin options market, due to prolonged price stagnation and decreased trading activity, the demand for directional bets has weakened, leading to a neutral bias across different maturities. At the same time, the long-term consolidation has compressed implied volatility to a new annual low, and the market expects a slow continuation of the summer trend.

The rise of the altcoin derivatives market

In the past year, the relative leverage ratio in the altcoin market has surged sharply. The perpetual contract open interest as a percentage of market capitalization has nearly doubled, increasing from 3% on July 1, 2024, to 5.6% today, indicating that leveraged trading in altcoins is much more active compared to a year ago.

The notional open interest of Ethereum has increased by 68%, while the notional open interest of Solana has grown by 115%. In contrast, Bitcoin's open interest has remained relatively stable, highlighting that traders' focus is increasingly shifting towards altcoins.

However, despite the steady increase in the holdings of altcoins, the funding rates of altcoins depict a cautious market landscape. In the first half of 2025, their funding rates have consistently approached or even dipped below Bitcoin's levels, indicating a risk-averse sentiment. The phenomenon of stable growth in holdings coexisting with moderate funding rates suggests that the positioning strategies across the market are quite restrained.