July Market Forecast: Policy Risks vs Record Low Slump, Will the Summer Market Break the Norm?

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

Despite the dense events and numerous messages in July, the market may still fall into calmness. From the experience of the past four years, every July has been accompanied by either positive or negative shock events, yet prices remain firm, and traders seem to prefer to "enjoy life" rather than monitor the market. Is there hope for something different this year, or is this idea merely wishful thinking?

July Outlook: Another Calm Summer?

A series of busy events are about to unfold. Policy trends continue to affect the market, distorting risk sentiment and driving the price of Bitcoin. July will be overshadowed by several potential impacts: the "big and beautiful" budget, the end of the tariff suspension period, and the deadline for the latest cryptocurrency executive order are all on the agenda this month.

• Budget Proposal: The "Big and Beautiful" budget proposal signed on July 5, Beijing time, 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 9, and more comments are expected to be made regarding different countries. The impact of the new tariffs will gradually be disclosed and adjusted throughout the month. Reflecting on the experiences from February to April, the uncertainty of tariffs can easily suppress market sentiment, negatively affecting Bitcoin.

• Cryptocurrency Executive Order: July 22 is the final deadline for the latest cryptocurrency executive order, by which the working group must submit a report recommending legislative and regulatory frameworks and assessing the United States' digital asset reserves. This reserve was previously affected by an executive order known as the "Strategic Bitcoin Reserve." Although all deadlines for this order have passed, information regarding the current quantity of Bitcoin held by the U.S. government, future procurement plans, or compensation for victims has not yet been made public. Even if no further information is released after July 22, decisions and announcements regarding the SBR may still be issued at any time.

These events could all affect the BTC trend, depending on which factor is dominant between fiscal expansion and trade uncertainty. In addition, the reduced liquidity due to the July 4th Independence Day holiday in the U.S. may increase recent market uncertainty and make traders unwilling to take risks.

The Impact of Evolving Policies on Market Sentiment

Policy changes disrupt the market, which is an undeniable fact. In the past six months, global uncertainty has increased, leading to a more sluggish market (especially the cryptocurrency market). Based on indicators such as funding rates, open interest, leveraged ETF exposure, trading volume, and options skew, it is hard to imagine that Bitcoin is only 5% away from its historical peak. In the current environment dominated by uncertainty, the market's risk appetite is expressed quite mildly through the aforementioned financial instruments, resulting in prices and risk tolerance being in a completely different structural state compared to past 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 during this seasonally slow 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 the fact that July in recent years has been filled with headline news significant enough to shake the market.

• In July 2021, after a certain country 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 starting to distribute assets at the beginning of the month, the German government selling Bitcoin, political turmoil occurring in the middle of the month, and significant political changes happening at the end of the month.

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

In-Depth Market Data Analysis

Spot market performance

Trading activity in the spot market has further weakened over the past seven days, with the average daily trading volume (ADV) decreasing by 34% compared to the previous week. The 7-day average trading volume has dropped to $2.18 billion, marking the lowest record since October 15, 2024. This sluggish activity is primarily driven by a narrow consolidation range and a relatively calm news environment.

The trading volume of Bitcoin spot trading fell to its lowest level since September 2024 in June 2025, continuing the generally sluggish trading trend of the summer. Historical data shows that from June to October, which only accounts for 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 slowest months of the year.

Volatility has also shown a similar pattern. The 7-day volatility has dropped to 0.79%, the lowest point since October 14, 2023. Notably, in the past year, the longest continuous duration of such low 7-day volatility (below 1%) has only been two days, indicating that there may be more significant market movements in the short term. Historical data shows that even against the backdrop of the 2021 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 shown strong performance. The Bitcoin ETP (Exchange-Traded Product) recorded a net inflow of 18,877 BTC in the past week, almost entirely contributed by significant capital inflows from the U.S. spot ETF, setting the strongest single-week inflow record 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 sluggishness according to past patterns.

Derivatives Market

Overall, the low futures premium, limited capital flow in leveraged ETFs, and the low leverage and moderate yields in the perpetual contract market indicate that the market squeeze driven by leverage poses limited risks in the short term.

• Futures Market: Cryptocurrency futures have shown lackluster performance over the past week, with traders avoiding new directional positions, despite the significant June contract expiration. Overall risk exposure remains subdued. The annualized premium for Bitcoin futures remains weak, hovering around 7-8%, and dipped to 6.5% during Tuesday's early 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 occurring continuously since last Thursday, indicating that the market's low-risk preference remains solid. In the past week, open interest in the futures market decreased by 2,105 BTC, mainly because traders held June contracts worth 8,960 BTC until expiration. Over the past two months, when the price of Bitcoin remained above $100,000, its open interest has fluctuated within a narrow range of 145,000 to 160,000 BTC.

• Perpetual Contracts: The perpetual contracts market also reflects the same cautious sentiment. The 7-day annualized funding rate averages only 2.5%, far below the neutral level of 10.95%. This indicates a continued 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 in Bitcoin perpetual contracts remains well below the peak in May, basically stagnating at the 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 the prolonged sideways price action and reduced trading activity, the demand for directional bets has weakened, and the term structure has trended towards neutrality. At the same time, the 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 Derivative Market

In the past year, the relative leverage ratio in the altcoin market has surged dramatically. The open interest of perpetual contracts relative to market capitalization has nearly doubled, growing 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%, from 13.2 million SOL to 28.3 million SOL. In comparison, Bitcoin's open interest has remained relatively unchanged, moving from 263,000 BTC on July 1, 2024, to 266,000 BTC on July 1, 2025, highlighting that traders' focus is increasingly shifting towards altcoins.

However, despite the steady increase in the holdings of altcoins, the funding rates of altcoins paint a cautious market picture. In November/December of last year, when market sentiment was high, the average funding rate of the top five altcoins by market capitalization reached as high as 60%, which was 35 percentage points higher than the funding rate of Bitcoin during the same period. But in 2