Welcome to the Asia Pacific Morning Brief—your essential digest of overnight crypto developments shaping regional markets and global sentiment. Monday’s edition is last week’s wrap-up and this week’s forecast, brought to you by Paul Kim. Grab a green tea and watch this space.
With the US employment situation deteriorating dramatically, the conflict between the Trump administration and the Fed over interest rate cuts is intensifying. The outlook for interest rates over the next three months is fluctuating daily with the inflation and employment indicators’ releases. The market is showing signs of extreme sensitivity.
US Stagflation Fears Triggered
Last week’s volatility in the cryptocurrency market began with the release of the ISM Services PMI on Tuesday. The index signaled a slowdown in the US services sector. Additionally, it reported that prices in the services sector have risen and employment has declined since April, when Trump’s “tariff war” began.
The situation where prices are rising while employment is declining is stagflation, one of the most difficult economic crises to deal with, because it prevents central banks from either lowering or raising interest rates. Concerns are growing in the market that the Trump administration’s tariff policy is pushing the US into stagflation.
At the same time, the probability of three interest rate cuts this year has been reduced to two. Last week, prices of most risk assets sensitive to market liquidity, including cryptocurrencies, fluctuated in line with the ever-changing interest rate outlook. When the probability of a rate cut was two times within the year, prices fell, and when it changed to three times, prices rose repeatedly.
The news that marked the end of the week was that Stephen Miran, chair of the White House Council of Economic Advisers, was appointed to fill the vacant position of Fed Governor Adriana Kugler. Miran is one of President Trump’s closest economic advisors. The market interpreted this appointment as a sign that President Trump strongly pushes to lower interest rates. The US stock market closed with the expectation of three interest rate cuts this year.
Ethereum Recovers From BlackRock Outflow
Over the weekend, Fed Vice Chair Michelle Bowman’s unexpected remarks fueled Ethereum’s surprise rise. In a speech to the Kansas Bankers Association, Bowman bluntly stated that “three rate cuts are necessary.” She emphasized that recent employment data show that proactive measures are needed to prevent further weakening of economic activity and employment conditions. Then, the price of Ethereum temporarily exceeded $4,300.
On the contrary, BlackRock made a move that was largely unexpected in the market. The major player in the US spot exchange-traded fund (ETF) industry withdrew significant funds from both its Bitcoin spot ETF (IBIT) and Ethereum spot ETF (ETHA) on Monday, injecting uncertainty into the market.
Net outflow of $292.21 million occurred in IBIT that day, marking the largest single-day outflow since May 30, over two months ago. Market analysts began speculating that Bitcoin prices could drop back down to the $111,000 level.
The Ethereum spot ETF, ETHA, saw a net outflow of $375 million. This represents a 3% decrease in BlackRock’s Ethereum holdings in a single day. The massive outflow from BlackRock’s ETF halted the 21-day consecutive net inflow record for Ethereum spot ETFs.
Tom Lee: “Buying Ethereum the Most Important Trade in Next 10 Years.”
Fortunately, the net outflow of ETF funds stopped after two days. Among the two major cryptocurrencies, Ethereum showed a faster recovery. The strategic purchases of ETH by U.S.-listed companies acted as a catalyst for Ethereum’s price recovery. Bitmain also updated its record as the world’s largest Ethereum-holding listed company, holding over 830,000 ETH.
Tom Lee, a renowned Wall Street investment guru, emphasized that buying Ethereum will be the most important trade he makes in the next 10 years. Geoff Kendrick, head of digital asset research at Standard Chartered Bank, explained that stocks of companies buying Ethereum could be a more attractive investment target than Ethereum spot ETFs.
It was a week when President Trump signed new executive orders to prevent debanking for lawful crypto businesses and to open the retirement fund market. Ethereum saw a 25.01% increase in its weekly price, while Bitcoin rose by only 5.44%, despite that it regained $119,000 over the weekend. Solana (SOL), which has a lower market capitalization than ETH, saw a 15.04% increase. It was a week in which Ethereum showed its clear presence.
CPI Should Be Low for a Stronger Market
This week is expected to follow a similar pattern to last week. The market’s attention is focused on whether the Fed will implement three interest rate cuts this year and whether a definite interest rate cut will be announced at the September Federal Open Market Committee (FOMC) meeting.
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In this context, the July US Consumer Price Index (CPI) data to be released on Tuesday is crucial. If the actual CPI figure significantly exceeds market expectations, the outlook for interest rate cuts in the second half of the year will likely become uncertain again. If that happens, cryptocurrency prices will face adjustment again.
The Producer Price Index (PPI) on Thursday night and the US July industrial production and retail sales figures on Friday are also worth watching. This is because they will provide evidence of whether the US economy is contracting.
Comments from Fed officials, who have a significant influence on the September FOMC interest rate decision, are also important. On Wednesday, Chicago Federal Reserve Bank President Austan Goolsbee will attend a monetary policy luncheon hosted by the Springfield Chamber of Commerce. Any comments on the current economic outlook or future interest rate directions could impact the market.
According to FedWatch data, as of the time of publication on Monday morning, the probability of a 0.25% interest rate cut at the September FOMC meeting stands at 88.4%. This probability might rise slightly once the benchmark interest rate futures market reopens after Vice Chair Bowman’s remarks over the weekend. However, it is difficult to confirm whether the probability of a rate cut will remain at this level by the end of the week.
I wish all our readers successful investments this week as well.
