Author: IOBC Capital
In the first half of 2025, the Crypto market was significantly influenced by multiple macro factors, with three key aspects being: Trump administration's tariff policies, the Federal Reserve's interest rate policies, and geopolitical conflicts in the Russia-Ukraine and Middle East regions.
Looking ahead to the second half of the year, the Crypto market will continue to navigate through a complex and changing macro environment, with the following macro factors playing crucial roles:
I. Derivative Impact of Trump's Tariff Policies: Inflation Expectations
Tariffs are an important policy tool for Trump's administration, with the government expecting to achieve a series of economic goals through tariff negotiations: First, expand US exports and reduce trade barriers in other countries; second, maintain a 10%+ base tariff to increase US fiscal revenue; third, enhance the competitiveness of specific industries and stimulate the return of high-end manufacturing.
As of July 25th, tariff negotiations between the US and major world economies have made varying degrees of progress:
Japan: Both sides have reached an agreement. US tariffs on Japanese goods have been reduced from 25% to 15% (including automotive tariffs), and Japan has promised to invest $55 billion in the US (covering semiconductors and AI fields), open up automotive and agricultural markets, and increase US rice import quotas.
European Union: The deadline is August 1st. EU negotiation representatives arrived in the US on July 23rd for final consultations, but the negotiation results have not been publicly disclosed.
China: The third round of trade negotiations will be held in Sweden from July 27th to 30th. After the previous two rounds of negotiations, US tariffs on China have been reduced from 145% to 30%, and Chinese tariffs on the US from 125% to 10%. There are reports that the US-China tariff negotiation period may be extended by 90 days, and if no new agreement is reached in the third round of trade talks, tariff suspension may be rolled back.
Additionally, the US has reached tariff agreements with the Philippines and Indonesia. Currently, the most closely watched is the third round of tariff negotiations between the US and China. Although the uncertainty of tariff policies is gradually decreasing, the possibility of failing to make substantial progress in negotiations with key economic entities cannot be ruled out, which could lead to greater impacts on financial markets.
From an economic theory perspective, tariffs are a negative supply shock with a "stagflation" effect. In international trade, while enterprises are the taxpayers of tariffs, they often transfer this tax burden to US domestic consumers through price transmission mechanisms. Therefore, it is expected that the US may experience a round of inflation in the second half of the year, which could significantly impact the Federal Reserve's interest rate reduction pace.
In summary, the impact of Trump's tariff policies on the US economy in the second half of the year may manifest as a phase of rising inflation. Unless data indicates low inflation pressure, it will likely slow down the interest rate reduction pace.
II. US Dollar Tidal Cycle in a Weak Dollar Phase Favors the Crypto Market
The US dollar tidal cycle refers to the process of systematic outflow and inflow of the US dollar globally. Although the Federal Reserve did not cut interest rates in the first half of the year, the dollar index has weakened: falling from a high of 110 at the beginning of the year to 96.37, showing a clear "weak dollar" state.
The weakening of the US dollar may have multiple reasons: First, the Trump administration's tariff policies have suppressed trade deficits, disrupted the dollar's circulation mechanism, and weakened the attractiveness of dollar assets, raising market concerns about the stability of the dollar system; second, fiscal deficits have undermined credit, with continuous increases in US debt scale and repeated rises in US debt rates, deepening market doubts about fiscal sustainability; third, the petrodollar agreement has expired without renewal, and global central banks' dollar reserve proportion has dropped from 71% in 2000 to 57.7%, with gold reserve proportion increasing, triggering "de-dollarization" attempts. Additionally, the policy orientation reflected in the rumored "Mar-a-Lago Agreement" may have also played a boosting role.
Based on previous US dollar tidal cycles, the dollar index's strength almost dominates the global liquidity change trend. Global liquidity often follows a complete 4-5 year US dollar tidal cycle, showing a cyclical fluctuation pattern. Among these, the weak dollar cycle typically lasts 2-2.5 years, and if calculated from June 24, this weak dollar cycle may continue until mid-26.
[Image]
[Image caption]
As the graph shows, Bitcoin's trend often shows a negative correlation with the dollar index. When the dollar weakens, Bitcoin typically performs strongly. If the "weak dollar" cycle continues in the second half of the year, global liquidity will shift from tight to loose, continuing to benefit the Crypto market.
III. Federal Reserve's Monetary Policy May Remain Cautious
There are four monetary policy meetings in the second half of 2025. According to the CME "Fed Watch" tool, there is a high probability of 1-2 interest rate cuts. Among these, there is a 95.7% probability of maintaining the current interest rate in July, and a 60.3% probability of a 25 basis point cut in September.
Since Trump took office, he has repeatedly criticized the Federal Reserve's slow interest rate reduction pace on X platform, even directly blaming Fed Chair Powell and threatening to fire him, which has subjected the Federal Reserve to certain political intervention pressures. However, the Federal Reserve withstood the pressure and did not cut interest rates in the first half of the year.
According to the normal term arrangement, Fed Chair Powell will officially step down in May 2026. The Trump administration plans to announce the nomination for a new chair in December 2025 or January 2026. In this context, the voices of major dovish committee members within the Federal Reserve are gradually attracting market attention and are viewed as potential "shadow chair" influence. Nevertheless, the market generally believes that the monetary policy meeting on July 30th will continue to maintain the current interest rate level.
Predictions for postponing interest rate cuts primarily have three core reasons:
- Persistent inflation pressure - Influenced by Trump's tariff policies, US CPI rose 0.3% month-on-month in June, with core PCE inflation rising to 2.8% year-on-year. The tariff transmission effect is expected to further push up prices in the coming months. The Federal Reserve believes that the path to bringing inflation down to the 2% target is obstructed and requires more data confirmation;
- Slowing economic growth - The 2025 growth rate is estimated at only 1.5%, but short-term data such as retail sales and consumer confidence have exceeded expectations, alleviating the urgency of immediate interest rate cuts;
- Persistent job market resilience - Unemployment rate remains low at 4.1%, but corporate hiring is slowing down. The market predicts that unemployment rate might gradually rise in the second half of the year, with Q3 and Q4 forecasts at 4.3% and 4.4% respectively.
In summary, the probability of an interest rate cut on July 30th, 2025, is extremely low.
[Image]
[Image caption]
Overall, the Federal Reserve's monetary policy is expected to remain cautious, with potentially 1-2 interest rate cuts throughout the year. However, by observing the historical trends of Bitcoin and Federal Reserve interest rates, there is actually no significant correlation between the two. Compared to changes in Federal Reserve interest rates, the global liquidity under the weak dollar state might have a more substantial impact on Bitcoin.
