"Those who sold in May will cry in June and FOMO in July"
The massive money printing in the United States will make the cryptocurrency To the Moon a reality 🚀. Trump has recently been putting pressure on both parties to push forward the Big Beautiful Act, and mentioned that the debt ceiling should be completely abolished. As mentioned last time, the growth of US debt will continue, and eventually smart people will store their wealth in scarce assets, that is, Bitcoin.
It has been almost two months since Liberation Day, and the current market outlook is much better than in the first quarter. First, the uncertainty of tariffs has decreased, institutional investors are making TACO investments (believing that Trump is always strong at first and then soft), the probability of tax cuts and deregulation actions being implemented is increasing, the US stock market/companies have recovered quickly from the fifth stress test in history (V-shaped reversal), and the Federal Reserve may be more dovish in 2026 (institutions are betting).
In addition, the proportion of long positions of hedge funds that are bearish on the stock market during the tariff crisis has begun to rise (as shown in Figure 1). The total exposure of hedge funds held by Goldman Sachs rose to a new high in May, indicating that the funds' participation in the market has increased. If we compare the net exposure of positions, it is very different. The long ratio has begun to rise (basically excluding the short ratio after tariffs). It is currently similar to the situation during the 2020 epidemic, when positions quickly turned short and then long due to risk events. The fundamental long-short hedging strategy in the United States also shows a similar situation (Figure 2). The net exposure of the fundamental strategy has risen to nearly 50%, which is a bullish signal. CTA strategy funds have also quickly rebounded and turned long (as shown in Figure 3). After the announcement of tariffs in April, the stock market hit bottom, and fund managers began to turn long in May, but the actual long exposure was not high, and the market still has the momentum to continue to strengthen.
The data released this week showed that ADP employment in May performed poorly (see Figure 4, the employment level has hit a new low since 2024, especially commodity manufacturing was the most affected), and the ISM non-manufacturing PMI was also lower than expected. These economic data are beginning to reflect the impact of the tariff storm. As mentioned in the previous few weeks, we are very likely to see news about stagflation and recession again in July and August, but these economic data are distorted. If the tariffs are clear, these lower-than-expected data will start to pick up in Q4.
The market expects the Fed to cut interest rates in September (currently with a 77% probability), but if the economic data is not good in the future, it is hard to imagine why Powell would not cut interest rates. A rate cut in June or July would be a big surprise (I wonder if Powell will obey after Trump's closed-door communication?). According to the current institutional forecasts of the Fed's interest rate path (as shown in Figure 5), there is still room for a 2 basis point cut this year and a 2.5 basis point cut next year. Most professional managers believe that the rate cut will be larger next year.
At present, market liquidity remains stable and market risk appetite has returned (as shown in Figure 6), and there has been no tightening of the credit market. What needs more attention is that the cash in the US Treasury account will be exhausted in August (TGA + unconventional measures), which means that the Treasury will need to re-enter the market to issue a large number of short-term Treasury bonds to replenish funds. If the Fed does not expand its bond purchases, the funds in the market will be absorbed, liquidity will be tightened, and pressure will be put on stocks and cryptocurrencies. Therefore, the Fed's interest rate meeting in June and July is very worthy of attention!
Finally, the crypto market has been full of good news. Although the market will undergo a short-term consolidation as I mentioned last week, it is only short-term. I think the next few days will be very good days for buying, and then it will continue to sprint to new highs. The US Crypto Act (GENIUS ACT) is being reviewed by the Senate, and other bills have been proposed one after another. More and more companies and sovereign countries are rushing to buy crypto assets (Figure 7, listed companies and ETFs are the largest buyers this year). In addition to MSTR announcing that it will continue to raise funds to purchase coins,$ETH Sharplink Gaming raises $425 million to create Ethereum reserve$SOL SOL Strategies files new $1 billion IPO prospectus....and Pakistan is building a strategic Bitcoin reserve...
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