July Market Outlook: Policy Variables vs. Record Lows, Summer Weakness or Breaking the Norm?

The market has entered a calm period, with trading volume dropping to a 9-month low and volatility reaching a 21-month low. This suggests that despite active dynamics expected in July, the market may experience a slowdown in growth during the summer.

Despite the numerous events and news in July, the market may still fall into a state of calm. Based on the experience of the past four years, each July has been accompanied by either positive or negative impactful events, yet prices remain resilient. Traders seem to prefer to "enjoy life" rather than focus on trading. Is this year expected to be different, or is this thought just wishful thinking?

July Outlook: Another Calm Summer?

A series of busy events are on the horizon. Trump's actions continue to impact the market, distorting risk sentiment and driving the price of Bitcoin. July will be overshadowed by Trump's potential influence: the "big and beautiful" budget proposal, the end of the tariff suspension period, and the deadline for the latest crypto executive order are all on the agenda this month.

• Budget Bill: Trump signed the "Big and Beautiful" budget bill on July 5th Beijing time. The bill is controversial due to its expansionary nature, potentially increasing 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 renewed discussions on tariffs.

• Tariff Issues: The 90-day tariff exemption period will end on July 9th, and it is expected that Trump will make more comments regarding different countries. The impact of the new tariffs will be gradually revealed and adjusted throughout the month. Looking back at the experience from February to April, tariff uncertainty can easily suppress market sentiment, which has a negative effect on Bitcoin.

• Crypto Executive Order: The third potential development is related to U.S. policy trends concerning cryptocurrencies. July 22 is the final deadline for the latest crypto executive order, by which time the working group is expected to submit a report recommending legislative and regulatory frameworks and assessing the U.S. digital asset reserves. These reserves have previously been influenced by an executive order known as "Strategic Bitcoin Reserves." Although all deadlines for this order have passed, information regarding the current amount of Bitcoin held by the U.S. government, future procurement plans, or compensation to victims has yet to be made public. Even if no further information is released after July 22, decisions and announcements regarding SBR could still be made at any time.

These events could all affect the BTC 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 and make traders reluctant to take risks.

The Evolving "Trump Trade" and Market Sentiment

Trump's actions have stirred the market, which is an undeniable fact. In the first half of his tenure, global uncertainty has increased, leading to a more sluggish market (especially the crypto market). Based on indicators such as funding rates, open interest, leveraged ETF exposures, trading volume, and options skew, it is hard to imagine that Bitcoin is only 5% away from its historical high. In the current environment dominated by uncertainty, the market's risk appetite is expressed very mildly through the aforementioned financial instruments, resulting in a completely different structural state of prices and risk tolerance compared to previous bull market periods.

This suppressed risk appetite can be interpreted as a positive signal for the future of Bitcoin. Limited enthusiasm means that if the market warms up later, 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 in this seasonally weak market.

History repeats itself or breaks the norm?

Looking back from 2021 to 2024, July is the second least active month of the year in terms of trading volume, despite July in recent years being filled with headlines substantial enough to shake the market.

• In July 2021, after China banned BTC mining, the price of BTC plummeted to its annual low;
• In July 2022, Three Arrows Capital and Celsius entered bankruptcy proceedings;
• Although 2023 has been relatively calm, a certain asset management company has submitted a BTC ETF application;
• The year 2024 will be particularly turbulent, with Mt. Gox beginning asset distribution at the beginning of the month, the German government selling Bitcoin, Trump surviving an assassination attempt and attending the BTC conference in the middle of the month, and Biden withdrawing from the presidential race at the end of the month.

In an environment lacking signs of market overheating, choosing to continue holding spot and maintaining patience may be a more prudent strategy.

In-Depth Market Data Analysis

Spot market performance

Trading activity in the spot market further weakened over the past seven days, with the average daily trading volume (ADV) dropping by 34% compared to the previous week. The 7-day average trading volume fell to $2.18 billion, marking the lowest record since October 15, 2024. This lackluster activity 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 2024 in June 2025, continuing the generally sluggish trading trend of summer. Historical data shows that from June to October, which accounts for only 43% of the year, it contributed only 32% of the annual trading volume. Historically, July (accounting for 6.1% of annual trading volume) and September (accounting for 6% of annual trading volume) are usually the quietest months of the year.

The volatility also shows a similar pattern. The 7-day volatility has dropped to 0.79%, the lowest point since October 14, 2023. Notably, over the past year, the longest consecutive duration of such low 7-day volatility (below 1%) has only been two days, indicating that there may be more substantial market fluctuations in the short term. Historical data shows that even against the backdrop of the 2021 China mining ban, the 2022 bankruptcy of crypto companies, and significant political events in 2024, the average volatility in July, September, and October remains relatively low.

Despite the weak price trend, the capital flow has performed strongly. The Bitcoin ETP (Exchange Traded Product) recorded a net inflow of 18,877 BTC over the past week, almost entirely attributed to a significant influx of funds from the U.S. spot ETF, marking the strongest single-week inflow since May 28. However, the strong capital inflow stands in stark contrast to 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 suggest that the market squeeze driven by leverage has limited risk in the short term.

• Futures Market: Cryptocurrency futures have performed modestly over the past week, with traders avoiding new directional positions despite the important June contract expiration. Overall risk exposure remains subdued. The annualized premium for Bitcoin futures remains weak, hovering around 7-8%, and slid to 6.5% during Tuesday morning trading, marking the lowest level in the past 8 days.

• Leveraged ETF: The activity of leveraged ETFs has also been mild, with small outflows of funds continuing since last Thursday, indicating that the market's low-risk preference remains solid. Over the past week, open interest has decreased by 2,105 BTC, primarily because traders held June contracts worth 8,960 BTC until expiration. Over the past two months, when the price of Bitcoin has remained above $100,000, its open interest has fluctuated within a narrow range of 145,000 to 160,000 BTC.

• 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%. This indicates a sustained lack of willingness in the market to establish new long positions, resulting in perpetual contract prices consistently being lower than spot prices. The open interest of Bitcoin perpetual contracts remains far below the peak in May, basically stagnating at a level of 266,000 Bitcoins, only slightly rebounding from last week's low of 257,000 Bitcoins.

• Options Market: Meanwhile, in the Bitcoin options market, due to prolonged price consolidation and reduced trading activity, the demand for directional bets has weakened, and the term structure has become more neutral. 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

In the past year, the relative leverage ratio of 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%, rising from 3.5 million ETH to 6.88 million ETH. In contrast, the notional open interest of Solana has surged by 115%, increasing from 13.2 million SOL to 28.3 million SOL. In comparison, the open interest of Bitcoin has remained relatively unchanged, at 2