July Outlook: Market Calm vs. Three Major Events, Is Summer Slump or Turning Point Approaching?

The market has entered a rare period of calm. Trading volume has dropped to a 9-month low, and volatility has hit a 21-month low, indicating that even with many significant events in July, the market may still continue the trend of slowing growth seen in the summer.

Experience over the past four years shows that every July is accompanied by significant events, but prices often remain strong. Traders seem more willing to "enjoy life" in this month rather than closely monitor the market. So, will this year be any different?

July Outlook: Another Calm Summer?

A series of important events is about to occur. Three major potential influencing factors will emerge in July:

1. Budget Proposal: The new budget proposal signed on July 5 has been controversial and could increase the U.S. deficit by $3.3 trillion. This expansionary fiscal policy is usually favorable for scarce assets, but its impact may be offset by other factors.

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

3. Policy Trends: July 22 is the final deadline for the latest policy directives. At that time, relevant working groups need to submit recommendations regarding the legislative and regulatory framework, as well as assess the government's digital asset reserves. Although some related deadlines have passed, decisions and announcements surrounding this topic may still be issued at any time.

These events may affect the cryptocurrency trends, depending on which factor dominates: fiscal expansion or trade uncertainty. Additionally, the reduction in liquidity due to the July 4th holiday may increase recent market uncertainty.

Evolution of Market Sentiment and Trading Patterns

From indicators such as funding rates, open interest, leveraged ETF exposure, trading volume, and options skew, it is hard to imagine that mainstream cryptocurrencies are only 5% away from their historical highs. In the current environment dominated by uncertainty, the market's risk appetite is showing a very mild performance, resulting in a completely different structural state of prices and risk tolerance compared to past bull market periods.

This suppressed risk appetite can be interpreted as a positive signal for the future. Limited enthusiasm 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; the overall leverage level remains controlled, which is more suitable for continuing to hold spot positions and maintaining patience during this seasonal downturn.

Historical Review: July is Often Eventful but the Market is Calm

Looking back over the past few years, July has been 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 major events that could shake the market:

• In July 2021, the regulation of cryptocurrency mining tightened, and prices plummeted to an annual low.
• In July 2022, several well-known cryptocurrency institutions went bankrupt.
• In July 2023, a large asset management company submitted an ETF application.
• In July 2024, political turmoil continued as several major events occurred one after another.

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

In-Depth Analysis of Market Data

Spot market performance

Trading activity in the spot market has further weakened over the past seven days, with the average daily trading volume down 34% from the previous week, falling to $2.18 billion, marking a new low in nearly nine months. This sluggish activity is primarily driven by a narrow consolidation range and a relatively calm news environment.

The spot trading volume of Bitcoin continued the generally sluggish trading trend of the summer. Historical data shows that from June to October, it only accounted for 43% of the year, but contributed only 32% of the annual trading volume. Historically, July and September are usually 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 21 months. It is worth noting that in the past year, such a low 7-day volatility has only lasted for a maximum of two days, indicating that more substantial market fluctuations may occur in the short term.

Despite weak price trends, fund flows have performed strongly. Bitcoin ETP recorded a net inflow of 18,877 units in the past week, setting a record for the strongest single-week fund inflow in recent times. However, the strong fund inflows contrast sharply with stagnant prices, indicating significant 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 based on past patterns.

Derivatives Market

Overall, the low futures premium, limited fund flows into leveraged ETFs, and the low leverage and moderate yields in the perpetual contract market suggest that the risk of a leveraged-driven market squeeze is limited in the short term.

In terms of futures, traders are avoiding new directional positions, despite the significant expiration of June contracts, and the overall risk exposure remains flat. The annualized premium for Bitcoin futures remains weak, hovering around 7-8%.

The activity of leveraged ETFs has also been mild, with small outflows of funds occurring continuously since last Thursday, indicating that the market's low-risk preference remains solid. Over the past two months, when the price of Bitcoin has remained at a high level, its open interest has been fluctuating within a narrow range.

The perpetual contract market also reflects the same cautious sentiment. The 7-day annualized funding rate averages only 2.5%, significantly below neutral levels. This indicates a continued lack of willingness in the market to establish new long positions, causing perpetual contract prices to remain below spot prices. The open interest for Bitcoin perpetual contracts is still far below the peak in May, essentially stagnating at the level of 266,000 contracts.

In the options market, due to prolonged price consolidation and reduced trading activity, the market's demand for directional bets has weakened, and the skew across various maturities tends to be neutral. At the same time, long-term consolidation has compressed implied volatility to an annual low, and the market expects the summer trend to continue to advance slowly.

The Rise of the Altcoin Derivatives Market

In the past year, the relative leverage ratio of the altcoin market has surged dramatically. The ratio of perpetual contract open interest to 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 nominal open interest of Ethereum has increased by 68%, while the nominal open interest of Solana has increased by 115%. In contrast, the open interest of Bitcoin has remained largely unchanged, 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 scenario. During the market surge in November/December of last year, the average funding rate of the top five altcoins by market capitalization reached as high as 60%, far exceeding the funding rate of Bitcoin during the same period. However, in the first half of 2025, their funding rates have tended to approach or even fall below the level of Bitcoin, indicating a risk-averse sentiment.

The stable growth of this open interest alongside a moderate funding rate indicates that the positioning strategy across the market is quite restrained.