The first week of July saw a stable market, the feud between Trump and Musk temporarily eased, the prospects for the Fed's interest rate cuts remain unclear, and tariff policies continue to be negotiated. Bitcoin (BTC) prices are strong but trading volume is declining, with investors exhibiting a wait-and-see attitude. Policy direction may become a key variable for the future market.
Weekly report for the first week of July.
There hasn't been much news this week, and there was even a Independence Day in between. As expected, the feud between Trump and Musk quickly subsided, with Musk being the first to back down. The reason we've already discussed is that both SpaceX and StarLink need the support of the US government, which makes Musk somewhat vulnerable in front of Trump. The actual result is this: although Musk established a so-called 'third party', he is still a joke in front of Trump.
There are countless 'third parties' in the US, and it is extremely difficult for such a third party to gain traction. This also happens to not touch Trump's bottom line; Trump naturally doesn’t care. Trump's bottom line is that Musk cannot support the Democratic Party; if that happens, it would probably be a 'no holds barred' situation.
Although this new week Trump has no time to deal with Musk, focusing all his energy on countering Powell and tariffs, Tesla has not rebounded as expected, now hovering around $300. This indicates that the market remains sensitive to Musk's 'big mouth', especially after the Great Beautiful Plan was passed. When Musk's unpredictability returns, it creates headaches for investors.
Moreover, from my personal understanding, the conflict between Trump and Musk is not over yet. Both Trump and Musk have busier matters at hand, and Trump will not excessively push Musk. If Musk is really pushed towards the Democratic side, it would undoubtedly cause headaches for Trump and the Republicans. So while these two may not conclude their relationship just yet, there should not be too much drama.
The reason Trump wants Powell to cut interest rates.
What Trump truly hates is not Musk, but Powell. In his worldview, he has already shown goodwill in January and February 2025 and softened his stance, but Powell just won't relent and refuses to cut rates, which frustrates Trump greatly. Because everything he wants to do must be based on the premise of low interest rates.
First, let's talk about the stock market. Trump has repeatedly claimed that his presidency will bring about a bull market. But the reality is that the stock market has become more volatile, especially after tariffs were imposed, leading to sharp market fluctuations and shaken confidence. This uncertainty is directly reflected in the polls, which are a drag on him and the Republican Party's election prospects. This is not a good factor for the midterm elections in 2026 and the general election in 2028. To stabilize the stock market, the first step is to cut interest rates, alleviating the constraints of high interest rates on liquidity.
Secondly, from a fiscal perspective, Trump's Great Beautiful Plan not only raises the debt ceiling but also increases fiscal spending, promotes manufacturing return, infrastructure, and industry subsidies. However, issuing bonds while bearing a 4.5% interest rate leaves the Treasury unable to even afford the interest. Cutting interest rates is the premise for maintaining this logic; without rate cuts, not only will plans fail to materialize, but the debt will continue to grow.
Next, concerning exchange rates, Trump is waging a global tariff war, with Japan, South Korea, China, and Mexico taking turns. Exporters are already under tremendous pressure; if the dollar remains strong, it will mean double pressure on domestic manufacturing. Therefore, for Trump, the depreciation of the dollar is very necessary, but it cannot be because of a recession. It can only be alleviated through interest rate cuts, and a decrease in DXY can also release more liquidity, stimulate risk markets, and increase investors' risk appetite.
Then politically, Trump needs an obedient Federal Reserve, rather than a maverick one. Trump needs Powell to be compliant. Because only with the cooperation of the Federal Reserve can Trump better execute tariffs and other political agendas. However, regarding inflation, I believe Trump will realize that there might be issues, but it is definitely not his primary concern right now. Having only been in office for six months, there have been incidents almost every month due to him.
Lastly and most importantly, we all know that historically, when the US has high interest rates, there is a 70% to 80% probability of economic recession. How could Trump not know this? Quickly cutting interest rates to eliminate the probability of economic recession caused by high rates is something Trump urgently needs to do. If an economic recession truly occurs during Trump's term, his approval ratings will drop even further, and it would become a target for the Democrats.
Monetary policy aspect.
Although Trump has been calling on Powell to cut rates from afar, the market's expectations for the Fed to cut rates in July and September have been decreasing. Last week, when we looked at the data, the probability of the Fed not cutting rates in July was only 80%, while today, that probability has risen to 95%. The probability of not cutting rates in September has increased from 6.8% to 34.1%. The main reason for this change is still due to inflation and employment data.
Rising inflation and declining unemployment indicate that inflation in the US is still not well controlled, while the economy remains very stable. Thus, investors have lowered the Federal Reserve's determination to cut rates in July and September, but this is not what Trump wants to see. We have already analyzed that Trump must cut rates to relieve pressure, yet Powell is unlikely to cooperate, especially regarding a July rate cut, which is nearly impossible.
The next scenario should be that Trump will choose a new chairman of the Federal Reserve this month. If this candidate is already a Fed governor, they may apply pressure on Powell from within the Fed. The names that have emerged so far are Bowman and Waller. If Waller is elected, it is likely that more people within the Fed will align with Trump.
This will both increase the internal competition within the Federal Reserve and raise market expectations for interest rate cuts, while simultaneously lowering the pressure of tariffs and fiscal deficits, which is the most practical approach. If interest rates are not genuinely reduced and cut quickly, the fiscal pressure on the US will continue to drain the market's liquidity. Therefore, Trump will likely announce a new Fed chairman as a counterbalance to the implementation of new tariffs.
Trump's reciprocal tariff policy.
The reciprocal tariffs started with Japan and South Korea. Trump first announced the tariff details for Japan and South Korea, a total tariff of 25%. It should be noted that the 25% tariff already includes the previous 10% base tariff, meaning that Trump is actually imposing a reciprocal tariff of 15%, making the total tariff 25%. Even so, this is still 10 times the average tariff in the US in 2024.
However, Trump has left a window open. If Japan and South Korea can meet the conditions of opening up to the US and reducing taxes, then tariffs may be reduced. Moreover, it is not just Japan and South Korea; Trump has also successively announced many tariff policies for Belt and Road countries and specifically warned BRICS countries (Brazil, Russia, India, China, South Africa) and their extended member states, viewing them as a group opposing US interests.
Moreover, it emphasizes that not only countries joining BRICS, but also those appearing pro-BRICS in diplomacy, finance (such as de-dollarization), and geopolitics will be seen as hostile or confrontational actions. These countries will be subjected to a 10% tariff.
Combining all the data, Trump's actions are very likely a bipartisan decision to impose higher tariffs on BRICS and Belt and Road countries to force them back into the dollar system. Therefore, the US and Europe do not have such significant issues, and negotiations between the US and the EU will likely go more smoothly.
On the contrary, regarding tariffs with China, although Trump previously stated that an agreement had been reached, neither side has disclosed the final negotiation details, and Trump has repeatedly hinted that more tariffs might be imposed on certain countries, especially considering the performances of BRICS and Belt and Road countries. It is very likely that the tariff issue between China and the US will erupt again, which is currently the biggest concern in the market.
Since the beginning of this year, every time the US-China tariff issue has arisen, it has led to significant fluctuations in risk markets. Currently, the biggest uncertainty regarding tariffs might be between the US and China. It is even possible that Trump has already said he would not postpone, yet still pushed the final date from July 9 to August 1, likely allowing enough time for US-China negotiations.
Whether cryptocurrencies are being used as a tool for corruption by Bukele's regime.
In June 2025, a Democratic senator from the US proposed the HB 2058 bill regarding Salvadoran President Bukele and his Bitcoin policy. This bill requires the US State Department to submit a report on whether 'cryptocurrency is being used as a tool for corruption by the Bukele regime.'
Key investigation into the total amount of funds used by El Salvador to purchase Bitcoin, government-controlled Bitcoin addresses, whether there is any misappropriation or opaque flow of funds, and whether there are any behaviors using BTC to evade international sanctions. I know many friends might wonder why this is a matter for the US to manage when it is clearly El Salvador's own issue.
In fact, since El Salvador adopted Bitcoin as legal tender in 2021, the US has been extremely vigilant towards that government. On one hand, Bitcoin as a payment effectively bypasses the dollar settlement system; it is worth noting that Bitcoin is not controlled by Swift. The US fears it could become a conduit for gray funds or terrorist financing. On the other hand, if El Salvador succeeds, more underdeveloped countries might follow suit, further undermining the dollar's position.
Additionally, it does not feel like Trump's style; he has had quite good communication with Bukele multiple times, especially regarding using Bitcoin as a strategic reserve, which has some similarities with El Salvador. However, from the tariff measures mentioned above, it is not essentially intended to attack BTC; it is more about the extension of dollar hegemony. In the future, it may restrict El Salvador's dollar channels and even cut off its cooperation with multilateral financial institutions like the IMF and World Bank, forcing El Salvador to return to the dollar system.
Returning to Bitcoin data.
Although many events have occurred in recent weeks, the price of Bitcoin remains very stable. In the past week, it has maintained around $108,000, appearing very resilient, yet trading volume is gradually decreasing. Currently, the trading volume is at the bottom for 2025. The decrease in trading volume can be seen as a decline in users' interest in trading and turnover, which indicates that the current price is gradually losing its appeal to investors. Furthermore, it also shows that users do not expect significant price declines.
We have been talking about this situation for a long time. Especially from the data of the Bitcoin spot ETF, spot ETFs can be seen as a reflection of traditional investors' sentiment. Recently, the net inflow of traditional investors has been gradually decreasing, and even with price increases in 2025, there have been no signs of large-scale buying like in 2024. Instead, it appears that traditional investors do not want to sell.
From the exchange inventory data, it can be seen that the inventory at exchanges has continued to decrease in the past week, indicating that investors' inclination to sell Bitcoin is very low. Not only have traditional investors reduced their selling demands, but even cryptocurrency investors' willingness to sell is decreasing. Compared to traditional investors, cryptocurrency investors are currently the main buyers, and the primary reason they do not want to sell is due to the US's openness and support for cryptocurrencies.
As long as there is no systemic risk, Bitcoin is very likely to show a slow upward trend during the Republican administration. However, if systemic risks arise, or if the Republicans or even Trump face challenges, this sentiment may weaken or dissipate.
Similarly, in terms of investor confidence data, it can be seen that investors holding Bitcoin for over a year have shown signs of distribution in the past week. Although this data did not show significant changes in the previous two weeks, the current distribution still indicates a possibility of price increase. Of course, this distribution may also be related to the movement of 80,000 Bitcoins from ten years ago, but this has not had an impact on the price, and there are no signs that these 80,000 BTC have entered the exchanges. There are still over 3.8 million Bitcoins in this ancient stock.
From the data on Bitcoin investors' positions in the past week, the overall trend shows that high-net-worth investors are increasing their holdings, while small-scale investors are maintaining their sell-offs. In the last 24 hours, however, there has been a slight sign of high-net-worth investors exiting the market while small-scale investors are accumulating. The main reason might be because Trump has postponed the reciprocal tariffs again. Additionally, the reduction in high-net-worth investors might be due to the decrease in exchange inventory data. I checked the detailed data, and the main reduction is in the range of 10,000 to 100,000 Bitcoins, which is likely a significant part of the exchange data.
Finally, still checking the BTC support situation through URPD data, after a week, the current concentration of chips has changed again. The accumulation of BTC between $104,000 and $108,500 is gradually increasing, and even with several small-scale fluctuations, there has not been a significant turnover. This range is likely to form a new bottom support, but from the support structure, $93,000 to $98,000 is still the safest position, which is more solid, and investor confidence is stronger. However, for BTC's price to continue rising and consistently break new highs, it still needs favorable policy stimuli, such as a change in the Federal Reserve chairman.
Overall, not much has happened in the past week, almost everything was within expectations. The upcoming July will see more of a game between tariffs and monetary policy. Although he has only been in office for six months, Trump does not have much time left. The Great Beautiful Plan and tariffs both require the support of the Federal Reserve. Investors' expectations for the risk market also hinge on the Fed's interest rate cuts. If Trump cannot secure the Fed's policy support, he is likely to see his approval ratings continue to decline, which is something that Trump and the Republicans absolutely do not want to see.