Author: IOBC Capital

In the first half of 2025, the Crypto market was significantly affected by many macro factors, of which the three most critical aspects are: the tariff policy of the Trump administration, the interest rate policy of the Federal Reserve, and the geopolitical conflicts between Russia, Ukraine and the Middle East.

Looking forward to the second half of the year, the Crypto market will continue to move forward in a complex and changing macro environment, and the following major macro factors will continue to play an important role:

1. The derivative effect of Trump's tariff policy is inflation expectations

Tariffs are an important policy tool for Trump's administration. The Trump administration hopes to achieve a series of economic goals through tariff negotiations: first, expand US exports and reduce trade barriers in other countries; second, retain the basic tariff of 10%+ and increase US fiscal revenue; third, enhance the local competitiveness of specific industries and stimulate the return of high-end manufacturing.

As of July 25, the tariff negotiations between the United States and major economies in the world have made varying degrees of progress:

Japan: The two sides have reached an agreement. The US tariff on Japanese goods has been reduced from 25% to 15% (including automobile tariffs), and Japan has pledged to invest $550 billion in the US (covering semiconductors and AI), open up the automobile and agricultural product markets, and increase the import quota of US rice.

EU: The deadline is August 1. EU negotiators arrived in the US on July 23 for final consultations, but the results of the negotiations have not yet been made public.

China: The third round of trade negotiations will be held in Sweden from July 27 to 30. After the previous two rounds of negotiations, the US tariff on China was reduced from 145% to 30%, and China's tariff on the US was reduced from 125% to 10%; there are reports that the US-China tariff negotiation period will be extended for another 90 days. If no new agreement is reached in the third round of trade negotiations, the suspended tariffs may be adjusted back.

In addition, the United States has reached tariff agreements with the Philippines and Indonesia. The most attention now is the third round of tariff negotiations between China and the United States. Although the uncertainty of tariff policy is gradually decreasing, the possibility that negotiations with key economies will not make substantial progress cannot be ruled out, and the financial market may face greater shocks at that time.

From the perspective of economic theory, tariffs are negative supply shocks with a "stagflation" effect. In international trade, although the taxpayers of tariffs are enterprises, enterprises often pass on this part of the tax burden to domestic consumers in the United States through the price transmission mechanism. Therefore, it is expected that the United States may see a round of inflation in the second half of the year, which may have an important impact on the Fed's rate cut rhythm.

In summary, the impact of Trump's tariff policy on the US economy in the second half of the year may be manifested as a phased increase in inflation. Unless the data shows that inflationary pressure is not great, it will lead to a slowdown in the pace of rate cuts.

Second, the weak dollar stage of the US dollar tidal cycle is good for the crypto market

The US dollar tidal cycle refers to the systematic outflow and reflux process of the US dollar around the world. Although the Federal Reserve did not cut interest rates in the first half of the year, the US dollar index has weakened: it has fallen unilaterally from the highest level of 110 at the beginning of the year to 96.37, showing an obvious "weak dollar" state.

The weakening of the US dollar may have many reasons: First, the tariff policy of the Trump administration has suppressed the trade deficit and destroyed the circulation mechanism of the US dollar. At the same time, tariff barriers have weakened the attractiveness of US dollar assets, causing market concerns about the stability of the US dollar system; second, the fiscal deficit has dragged down credit, the continued rise in the scale of US debt, and the repeated rise in US debt interest rates have caused the market to deepen doubts about fiscal sustainability; third, the petrodollar agreement expired and was not renewed. The proportion of US dollar reserves of global central banks fell from 71% in 2000 to 57.7%, and the proportion of gold reserves increased, triggering an attempt to "de-dollarize"; in addition, the policy orientation reflected in the "Mar-a-Lago Agreement" in market rumors may also have played a boosting role.

According to previous US dollar tidal cycles, the strength of the US dollar index almost dominated the trend of changes in global liquidity. Global liquidity often follows the complete 4-5 year cycle of the US dollar tide, showing a pattern of cyclical fluctuations. Among them, the weak dollar cycle lasts roughly 2-2.5 years. If it starts from June 24, this round of weak dollar cycle may last until the middle of 26.

Chart: IOBC Capital

As can be seen from the above figure, the Bitcoin market and the US dollar index are often negatively correlated. When the US dollar weakens, Bitcoin usually performs strongly. If the "weak dollar" cycle continues in the second half of the year, global liquidity will turn from tight to loose, which will continue to benefit the crypto market.

3. The Fed's monetary policy may still remain cautious

There will be four interest rate meetings in the second half of 2025. According to the CME "Fed Watch" tool, there is a high probability of 1-2 interest rate cuts in the second half of the year. Among them, the probability of maintaining interest rates unchanged in July is as high as 95.7%; the probability of a 25 basis point interest rate cut in September is 60.3%.

Since Trump took office, he has repeatedly criticized the Fed's slow pace of interest rate cuts on the X platform, and even directly accused Fed Chairman Powell and threatened to fire Powell, which has put the Fed's independence under certain political intervention pressure. However, in the first half of the year, the Fed withstood the pressure and did not cut interest rates.

According to the normal term arrangement, Fed Chairman Powell will officially step down in May 2026. The Trump administration plans to announce the nominee for the new chairman in December 2025 or January 2026. In this case, the voices of the main dovish members of the Fed have gradually attracted market attention and are seen by the market as a manifestation of the influence of the potential "shadow chairman". Despite this, the market generally believes that the interest rate meeting on July 30 will continue to maintain the current interest rate level.

There are three main reasons for the postponement of the rate cut:

1️⃣Continued inflationary pressure - Affected by Trump's tariff policy, the US CPI rose by 0.3% month-on-month in June, and the core PCE inflation rose to 2.8% year-on-year. It is expected that the tariff transmission effect will further push up prices in the coming months. The Fed believes that the inflation rate has been blocked from falling back to the 2% target, and more data is needed to confirm the trend;

2️⃣Slowing economic growth - the growth rate is expected to be only 1.5% in 2025, but short-term data such as retail sales and consumer confidence have exceeded expectations, easing the urgency of an immediate rate cut;

3️⃣The job market remains resilient - the unemployment rate remains at a low level of 4.1%, but corporate recruitment has slowed down. The market predicts that the unemployment rate may rise slowly in the second half of the year, with the forecast unemployment rates for Q3 and Q4 being 4.3% and 4.4% respectively.

In summary, the probability of a rate cut on July 30, 2025 is extremely low.

Chart: IOBC Capital

In general, it is expected that the Fed's monetary policy will remain cautious, and the number of rate cuts throughout the year may be 1-2 times. However, when we observe the trend charts of Bitcoin and the Fed's interest rate in the past, there is actually no significant correlation between the two. Compared with the changes in the Fed's interest rate, the global liquidity under the weak dollar state may have a greater impact on Bitcoin.

Fourth, geopolitical conflicts may affect the Crypto market in the short term

The Russian-Ukrainian war is still in a stalemate, and the prospects for a diplomatic solution are bleak. On July 14, Trump proposed a "50-day ceasefire deadline". If Russia fails to reach a peace agreement with Ukraine within 50 days, the United States will impose 100% tariffs and secondary tariffs on it, and provide military assistance to Ukraine through NATO, including "Patriot" air defense missiles. However, Russia has assembled 160,000 elite troops and plans to provide them only for key fortresses on the Donbass front in Ukraine. At the same time, Ukraine has not been idle, and on July 21, it also carried out a large-scale drone attack on Moscow Airport. In addition, Russia announced its withdrawal from the three-decade military cooperation agreement with Germany, and Russia-EU relations have completely split.

From the current situation, it seems a bit difficult to achieve the goal of a ceasefire on September 2. If a ceasefire fails by then, Trump's sanctions may cause market turmoil.

V. Crypto regulatory framework takes shape, and the industry ushers in a policy honeymoon period

The US GENIUS Act has been implemented in July 2025. The Act stipulates that "interest shall not be paid to coin holders, but the reserve interest belongs to the issuer and the purpose must be disclosed." However, it does not prohibit the issuer from sharing interest income with users, such as Coinbase's USDC annualized 12%. The prohibition on paying interest to coin holders restricts the development of "yield-based stablecoins", which was originally intended to protect US banks and prevent trillions of dollars from being lost from traditional bank deposits, because these deposits support loans to businesses and consumers.

The US CLARITY Act clearly stipulates that the SEC regulates security tokens and the CFTC regulates commodity tokens (such as BTC and ETH). The concept of "mature blockchain system" is introduced, and regulatory conversion can be achieved through certification. Blockchain projects that are decentralized, open-source, and run automatically based on preset rules will be deemed "mature" after passing certification (such as submitting materials proving that there is no centralized control), and the regulatory compliance upgrade from "securities" to "commodities" can be completed, that is, the regulatory leadership is completely owned by the CFTC, and the SEC no longer exercises securities regulatory power over it. In addition, some exemptions are provided for DeFi - such as writing code, running nodes, providing front-end interfaces, and non-custodial wallets are generally not considered financial services and are exempt from SEC supervision. Only basic terms such as anti-fraud and anti-manipulation need to be complied with.

Overall, the accelerated advancement of the "GENIUS Act", "CLARITY Act", and "Anti-CBDC Surveillance State Act" marks the United States' move from the "regulatory ambiguity" stage to the "sunshine regulation" era for cryptocurrencies. At the same time, it also reflects its policy intention to "maintain the global trade currency status of the US dollar." As the regulatory framework gradually improves, the scale of the stablecoin market is expected to expand further, and those stablecoin projects and DeFi protocols that can meet compliance requirements will benefit.

Six, the "coin-stock strategy" activates market enthusiasm, and its sustainability remains to be seen

When MicroStrategy completed its epic transformation with the "Bitcoin strategy", a crypto asset reserve revolution led by listed companies was sweeping the capital market. From ETH to BNB, SOL, XRP, DOGE, HPYE, TRX, LTC, TAO, FET and more than ten other mainstream altcoins have become new anchors for corporate treasuries. This "coin-stock strategy" is becoming a market trend this year.

Briefly analyze this capital alchemy with MicroStrategy's "triple flywheel":

• Stock-coin resonance flywheel: the stock price has a long-term premium relative to the net value of holdings (currently 1.61x), building a low-cost financing channel; fundraising → increasing BTC → pushing up the coin price → enlarging the gold content per share → feeding back the valuation, forming a spiral upward closed loop.
• Stock-bond synergy flywheel: zero-interest convertible bonds cleverly transform debt pressure, without the burden of principal repayment, and the initiative of conversion is in the hands of the company; attract hedge fund arbitrage capital and inject low-cost liquidity.
• Coin-bond arbitrage flywheel: replace the appreciation of crypto assets with depreciating fiat currency bonds to complete the long-term arbitrage layout.

And the tiered sales strategy is used to accurately capture three types of capital: preferred stocks lock in fixed-income investors, convertible bonds attract arbitrage funds, and stocks carry risk games. For specific logic, please refer to "One article to understand MSTR MicroStrategy's Bitcoin strategy".

Since the beginning of this year, more and more listed companies have adopted the "coin-stock strategy" (i.e., allocating crypto assets as reserve assets in the balance sheet), the scale of asset reserves has continued to expand, and asset allocation has shown a trend of diversification. According to incomplete statistics: 35 listed companies have a total reserve of more than 92w BTC; 13 listed companies have a total reserve of more than 148w ETH; 5 listed companies have a total reserve of more than 291w SOL. The rest are not listed here, and we will explain the reserve details of each project in detail in the next article.

The integration of traditional finance and the crypto world is a unique market variable in this cycle. When listed companies transform their balance sheets into crypto asset combat platforms, we must also be wary of risks when the tide recedes.

Summary

If the above-mentioned foreseeable macro events are deduced in chronological order, the second half of the year can be divided into the following stages:

Chart: IOBC Capital

The market is like the ocean, we cannot predict the storm, we can only adjust the sails in the storm.