The expectation of interest rate cuts in the US is rising, Ethereum welcomes the Spot ETF, and market sentiment is gradually warming up.

Recent economic data released by the United States has dispelled market concerns, with the probability of a rate cut starting in September now reaching 100%. The US stock market is shifting styles as expected, with large tech stocks breaking apart and small-cap stocks and non-tech sectors seizing the opportunity for growth. Although the cryptocurrency market experienced significant volatility in July due to sentiment, it has now stabilized. The Ethereum Spot ETF has begun trading; although short-term selling pressure from Grayscale is exerting some pressure on prices, this pressure is not expected to last long due to the rapid speed of the sell-off.

On July 25, the United States announced a year-on-year growth rate of 2.8% for Q2 2024 GDP, higher than the expected 2.0%. The PCE price index grew by 2.6% in Q2, lower than the 3.4% in Q1. The core PCE price index, excluding food and energy prices, grew by 2.9%, also lower than the previous value of 3.7%. However, the market does not seem to fully acknowledge these data. On the day the data was released, the US stock market experienced severe fluctuations, with intense battles between bulls and bears throughout the day, making it difficult for the market to reach a consensus.

In fact, many investors question the credibility of the economic data released by the U.S. government. Taking non-farm data as an example, the U.S. Department of Labor significantly revised down the previous months' data while announcing the latest figures. This practice has sparked various speculations in the market, with some believing that economic data may be used as a tool for policy adjustment.

Long-term interest rate hikes have had a significant impact on the U.S. economy. Currently, the market generally believes that some economic data may be creating conditions for interest rate cuts. This expectation has indeed had an effect: the market currently predicts a 100% probability of rate cuts starting in September.

This extreme situation indicates that the market has begun to adjust the pricing expectations for various assets during the interest rate cut cycle. The yield on the US ten-year Treasury bonds is generally on a downward trend, as funds shift from the risk-averse sentiment of the interest rate hike cycle to repricing assets during the interest rate cut cycle.

Recent trends in the Russell 2000 Small Cap Index and the Nasdaq Composite Index indicate that on July 11, when the Nasdaq reached its peak, it was precisely the day the Small Cap Index began to rise. On this day, the U.S. released the latest CPI data, and the market keenly picked up on signals of easing inflation, with a general consensus that interest rate cuts could begin in September. Subsequently, funds quickly withdrew from large-cap stocks, causing the concentrated positions to unravel and start flowing into small-cap stocks. This "large to small" style shift is reasonable because during a rate-cutting cycle, increased liquidity enhances market speculation, and small-cap stocks, compared to large-cap stocks, exhibit higher volatility, making them more suitable for speculation.

Currently, two companies from the "Magnificent 7" in the US stock market (Apple, Microsoft, Alphabet, Tesla, Nvidia, Amazon, Meta) have released their second-quarter earnings reports. Tesla's performance was below expectations, while Alphabet performed relatively well. The market is waiting for the earnings reports of other companies, especially Apple's performance report on August 1. If only Nvidia benefits in the AI field while other companies perform mediocrely, it is likely to be difficult to support the entire market. Coupled with the shift in investment styles, the US stock market may face more adjustment pressure.

In July, the cryptocurrency market experienced significant fluctuations due to multiple factors. The price of Bitcoin once fell below 54,000 USD, then broke through 70,000 USD, and by the end of the month, it retreated to around 66,000 USD. Recently, the Bitcoin volatility index reached a high level, indicating that the market is in a phase where both bulls and bears are evenly matched.

The Ethereum market is experiencing an important moment this month: on July 23, Eastern Time, it coincides with the 10th anniversary of the first public sale of Ethereum, and the Ethereum Spot ETF has started trading. However, market performance has been quite flat: on the first day of trading, there was a net inflow of over $100 million, but in the following days, there was a continuous net outflow. Grayscale's products continue to see significant outflows, similar to the situation when the Bitcoin Spot ETF was launched.

However, there is no need to worry excessively about this situation. Currently, the selling pressure of Grayscale ETF is very fast, which means that the selling pressure will quickly decrease. The rapid launch of the Ethereum Spot ETF has proven that crypto assets are being accepted by traditional markets at an unexpected speed, and the future prospects of crypto assets are bright.

Overall, the market in July was primarily driven by sentiment. The cryptocurrency market currently may lack a new bull market narrative, coupled with a decoupling from the U.S. stock market, resulting in a more chaotic period, making it more susceptible to emotional influences.

However, the market has basically digested these emotions and is showing a spiral upward recovery trend, with the price of Bitcoin developing in a positive direction. Bitcoin Spot ETF continues to see net inflows, reflecting that the market panic has not persisted, indicating that a larger market movement may be on the horizon.

Despite uncertainties in the macro economy and traditional financial markets, the cryptocurrency asset market has shown independence and resilience, and is expected to play an increasingly important role in diversified portfolios, providing investors with new growth opportunities. This month, Bitcoin's price has been quite volatile, mainly influenced by sentiment, but the long-term trend represented by Bitcoin Spot ETF remains unchanged. The launch of Ethereum Spot ETF has also brought new vitality and stability to the market. Although the future of the crypto market is full of challenges, it is also full of hope.