The US interest rate cut is imminent, and Ethereum is迎来重要里程碑, market sentiment is gradually warming.

Recent U.S. economic data has eased market concerns, with the market now expecting a 100% probability of a rate cut in September. U.S. stocks are undergoing a style shift as anticipated, with large tech stocks collapsing and small-cap stocks and non-tech sectors seizing opportunities. The cryptocurrency market experienced volatility in July due to sentiment, but it has now stabilized. Ether spot ETFs have begun trading; although Grayscale's selling pressure has temporarily impacted prices, the selling speed is quite fast, and the pressure may not last long.

On July 25, the United States announced an annualized quarter-on-quarter GDP growth of 2.8% for Q2 2024, exceeding the expected 2.0%. The PCE price index increased by 2.6% in Q2, lower than the 3.4% in Q1. The core PCE price index, which the Federal Reserve focuses on, grew by 2.9%, also below the previous value of 3.7%. However, the market reacted differently to these data, with significant fluctuations in the US stock market that day, indicating investors have varying views on the economic outlook.

Some investors question the authenticity of official economic data, especially the frequent revisions of non-farm employment data that have sparked controversy. In the past five months, employment data has been revised down in four of those months, which has led to various speculations in the market, even raising doubts that economic data is being used as a policy tool.

The long-term interest rate hikes have significantly impacted the U.S. economy, and the market generally believes that the current economic data may pave the way for interest rate cuts. This strategy seems to be very effective: current market tools indicate a 100% probability of interest rate cuts starting in September.

This extreme expectation indicates that the market has begun to reprice various assets for 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 aversion sentiment of the rate hike cycle to repricing assets in the rate cut cycle.

Observing the recent trends of the Russell 2000 small-cap index and the Nasdaq Composite Index, an interesting phenomenon can be observed: on July 11, when the Nasdaq reached its peak, it was exactly when the small-cap index began to rise. On that day, the U.S. released the latest CPI data, and the market picked up signals of easing inflation, believing that interest rate cuts might begin in September. Funds quickly flowed out of large-cap stocks and started pouring into small-cap stocks. This "shift from large to small" style change is reasonable during an interest rate cut cycle, as small-cap stocks are more volatile and more suitable for speculation.

Currently, among the "seven major tech giants" of the US stock market, Tesla and Alphabet have released their second-quarter earnings reports. Tesla's performance was below expectations, while Alphabet overall exceeded expectations but YouTube's ad revenue fell short. The market is awaiting Apple's earnings report on August 1. If only NVIDIA benefits from the AI wave while other giants perform mediocrely, coupled with a shift in investment style, the US stock market may face more adjustments.

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

Trump's speech at a cryptocurrency conference caused a brief market fluctuation, but the impact did not last. The market seems to have overestimated the probability of Trump being elected president, while his competitor Harris also has a relatively high approval rating, and Harris's stance on cryptocurrency remains unclear.

On July 23, the Ethereum spot ETF began trading, coinciding with the tenth anniversary of Ethereum's first public sale. However, the market reaction was muted: over $100 million net inflow on the first day of trading, but a sustained net outflow in the following days. There has been a continued large outflow from Grayscale products, which is similar to the situation when the Bitcoin spot ETF was launched. Grayscale's high fees may lead investors to shift to competitor products.

However, the selling speed of Grayscale's ETFE is very fast, and the selling pressure may decrease quickly. The launch of the Ethereum spot ETF indicates that crypto assets are being adopted by traditional markets at an unexpectedly rapid pace, and the long-term outlook remains optimistic.

Overall, the market in July was mainly dominated by sentiment. The crypto market currently seems to lack new bull market narratives, coupled with a decoupling from the US stock market, is in a chaotic period. However, the market has begun to digest sentiment, showing a spiraling upward repair trend. Bitcoin spot ETFs continue to see net inflows, indicating that market panic has not persisted, suggesting that a larger market movement may be on the horizon.

Despite the uncertainty in the macro economy and traditional financial markets, the cryptocurrency asset market has demonstrated independence and resilience, and is expected to play a more significant role in diversified investment portfolios. Although Bitcoin prices have experienced fluctuations, the long-term trend remains unchanged. The launch of the Ethereum spot ETF has brought new vitality to the market. The future of the crypto market is full of challenges, but also full of hope.