Crypto market July review: BTC hits a new high, ETH shows strong rebound

In July, the crypto market experienced a strong surge. Bitcoin (BTC) rose 8.01% throughout the month, reaching a peak of $120,000, setting a new historical high. Ethereum (ETH) performed even better, surging 48.80% within the month.

Behind this wave of increase is strong support formed by continuous accumulation by enterprises, inflow of ETF funds, and injection of funds through stablecoin channels. However, changes in the expectations of the Federal Reserve's interest rate cuts and adjustments in tariff policies have, to some extent, suppressed further price increases, while also temporarily interrupting the comprehensive development of small-cap coins.

Since 2023, American individual and corporate investors have gradually increased their allocation to crypto assets represented by BTC. In November 2024, with the new government establishing BTC as a national strategic reserve and introducing a series of favorable policies, it marks the official entry of the crypto industry into a new development stage.

However, deep participants in the crypto market are facing a complex situation. On the one hand, BTC is being held long-term by new funds, and its price continues to reach new highs; on the other hand, the small coin market has yet to fully start, and even ETH, which is regarded as a cornerstone of the industry, once fell below the price at the beginning of this bull market in April, raising concerns in the market. However, ETH's strong rebound in July seems to have injected new confidence into the market.

Industry analysts believe that the encryption industry is at a historical turning point. The factors determining asset prices are undergoing significant changes, shifting from the previous supply-demand cycles and speculative frenzy to the positioning of emerging assets in global asset allocation. This structural transformation presents unprecedented challenges and opportunities for market participants.

Macroeconomic Environment: Inflation Rebound and Employment Data Intertwined

In July, the US capital market was mainly influenced by three factors: the timing of the Federal Reserve's interest rate cuts, adjustments in tariff policies, and the performance of economic data. The market showed a predominantly bullish sentiment for most of the month, but a correction occurred after the news was released at the end of the month.

The topic of the Federal Reserve's interest rate cuts has been dramatic throughout the month. On one hand, the government continues to exert pressure, while on the other hand, the Federal Reserve insists on its dual mission of "inflation + employment" and remains data-driven. Different voices have also emerged within the Federal Reserve, with some members beginning to support a prompt interest rate cut.

After the FOMC meeting on July 31, the market's expectation for a rate cut in September briefly fell to a low point. However, the non-farm employment data for July, released on August 1, fell short of expectations, reigniting hopes for a rate cut in the market.

In terms of tariff policy, the new tax rates introduced in July exceeded market expectations, increasing concerns about rising inflation. Economic data shows that the annualized GDP growth rate for the US in Q2 was 3%, reversing the negative growth trend in Q1 and exceeding expectations. However, the non-farm payroll data for July was significantly below expectations, raising market concerns about an "economic soft landing."

Overall, the market in July rose under the expectations of interest rate cuts and economic optimism, but the tariff policy and employment data at the end of the month hit market confidence. The three major U.S. stock indices all saw varying degrees of increase throughout the month, with Nasdaq performing the best, rising 3.7%.

Crypto Assets: The upward trend of BTC remains unchanged, and the market for altcoins is promising.

In July, BTC opened at $107,173.21, closed at $115,761.13, and reached a historical high of $123,231.07, with a monthly increase of 8.01%. ETH performed even better, rising 48.8% in a single month.

From a technical perspective, BTC is still operating above the 60-day moving average and the first ascending trend line of the bull market. The monthly trading volume has increased, indicating that a new round of upward momentum is still continuing. The monthly MACD indicator shows that the market is still in a strong upward momentum.

It is worth noting that at the end of July, the ETH/BTC trading pair broke through technical indicator resistance, suggesting that the altcoin market may soon be unfolding. With the expectations of interest rate cuts heating up, market risk appetite is increasing, and the probability of a full launch of altcoins is rising.

Chip Structure: Long-term Holders Start to Take Profits

In July, driven by buying pressure, the price rose, and long-term holders initiated the third wave of profit-taking in this bull market. Data shows that long-term holders reduced their holdings by nearly 200,000 BTC in July, including 80,000 from an early wallet. Meanwhile, the positions of short-term holders rapidly increased.

Despite a large amount of BTC flowing from long-term holders to short-term holders, which has increased short-term liquidity in the market, the impact on prices is much smaller compared to the past. This indicates that as the structure of market participants changes, market depth has significantly increased.

Institutional allocation remains the main driving force behind the recent rise in BTC prices. Data shows that BTC on centralized exchanges continues to experience a net outflow of over 40,000 coins. As of the end of July, the BTC held directly by listed companies has exceeded 4.5% of the total supply.

Capital Flow: Set a Record for the Second Largest Monthly Inflow in History

In July, the crypto market saw a total inflow of over $29.5 billion, making it the second largest inflow month in history. Among this, stablecoins accounted for $12 billion, the spot ETFs for BTC and ETH totaled $11.3 billion, and corporate purchases amounted to $6.2 billion. Corporate purchases have become the single largest source of buying in the BTC market.

It is worth mentioning that total capital inflows have increased for five consecutive months, driving BTC to continue rising from the six-month low set in April and reaching an all-time high. The allocation of BTC by American companies is still accelerating, and it is expected to remain the most important factor driving price increases in the near future.

In addition, the inflow of funds into the ETH spot ETF reached $5.298 billion in July, setting a new historical high, nearly catching up to the $6.061 billion of the BTC spot ETF. This reflects that as expectations for interest rate cuts heat up and encryption assets become more widespread in the United States, more and more capital is starting to pay attention to ETH. At the same time, the scale of corporate allocations to ETH is also growing rapidly, accounting for 2.6% of the total circulation by the end of the month.

Outlook

Comprehensive multi-dimensional analysis shows that BTC is still in the relay period of the fourth wave rise in this bull market. It is expected that after the fluctuations in August, BTC will likely continue to rise.

With the expectation of interest rate cuts rising, market risk appetite is increasing, and the market for small coins led by ETH is expected to fully unfold.

However, changes in tariff policies, U.S. inflation, and employment data performance are still potential risk factors that need close attention.