Markets are running two fights at once this week. One is playing out in equities, where record highs and AI-fueled optimism keep pulling in fresh buyers. The other is playing out in rates, where 30-year yields above 5% keep reminding everyone that money still has a cost. Neither side is winning outright. That standoff, more than growth, inflation, or crypto regulation, was the real story of the week.
Macro: Yields Still Call the Shots
US equities pushed to fresh record highs on AI-fueled earnings optimism and the move had the hallmarks of a FOMO-driven chase higher with more than 4 million S&P call options traded in a single session, the highest level ever recorded. Markets went from July de-risking to August performance anxiety in record time. For all the focus on AI, a little Situational Awareness might still be useful. Markets are celebrating growth and earnings, but the bond market is still quietly reminding everyone that capital is not free.
Underneath, conditions are getting less comfortable. The 30-year Treasury yield remains around 5.2%, a level that would have looked unthinkable alongside all-time-high equities just a few years back. Fed officials are still leaning cautiously. San Francisco Fed President Daly reiterated that more data is needed before the path of policy is clear, while inflation expectations stay broadly anchored and the labor market isn’t generating material price pressure.
Labor remains the key variable to watch. Wednesday’s ADP print came in at just 44,000, well below expectations and down sharply from June’s 98,000. ADP is a poor predictor of NFP on any given month, but the trend is another reminder that growth is slowing beneath the headline numbers.
Geopolitics helped the mood. Brent crude dropped below USD 80 on hopes that a draft agreement on Strait of Hormuz transit is close to done. Iran continues to warn that shipping security is not fully assured, but markets have chosen to price de-escalation over disruption. That matters more than it might seem: oil remains one of the biggest obstacles to a more dovish policy backdrop.
Japan is the macro story that is not getting enough attention in our view. Efforts to stabilize the yen increasingly look less like a standalone FX story and more like an attempt to stabilize global funding markets, and by extension, Treasuries. Pressure on JPY will not meaningfully ease until the Fed cuts or global dollar liquidity expands. Until liquidity improves, higher yields remain a constraint on both traditional and digital assets alike.
Crypto: Resilient, But Still Waiting
Crypto continues to frustrate bulls and bears in equal measure. BTC is holding around USD 64,000, a level that looks stable despite a backdrop that should arguably be more supportive: equities at highs, oil softer, spot ETFs still absorbing flow, institutional adoption headlines nonstop. Price still cannot clear USD 65,000.
That disconnect is becoming the story. Bitcoin ETFs absorbed another USD 763.6 million of inflows this week, yet BTC finished lower on the week. The read is straightforward: ETF demand is being met by equally willing supply. The marginal buyer is not chasing price higher anymore.
Our view is unchanged: market structure is constructive, not yet bullish. Sellers cannot force BTC materially below USD 62,000, which is encouraging, but buyers cannot reclaim and hold USD 65,000 either, which tells us fresh demand is still thin. Without a fresh push from regulation, liquidity, or accelerating ETF flow, crypto likely stays range-bound through the rest of summer. The Senate’s CLARITY Act push before recess due today remains short of the support needed to clear procedural hurdles and a vote today now looks off the table. That leaves crypto market structure legislation stalled heading into the weekend, with the next realistic window likely September, and markets showing little sign they were pricing a near-term breakthrough anyway.
Looking Ahead: Payrolls Day
Today’s payrolls report is the next real test. The market is looking for +80,000 increase in July versus a prior +57,000, with average hourly earnings expected to show a stable monthly increase of 0.3%.
A soft print reinforces the view that markets are overpricing hikes and underpricing future easing, and would likely pressure yields lower. A stronger number keeps pressure on yields up and could extend the current gap between resilient asset prices and still-restrictive financial conditions.
For crypto, the level to watch has not changed. A convincing break through USD 65,000 alongside continued ETF demand would challenge the range-bound narrative and open the door to a test of USD 72,000. Until that happens, patience remains the trade.
The bigger picture is still liquidity. Markets are behaving as though easier financial conditions are inevitable. The open question is whether policymakers deliver that, or whether yields force another reality check first.
Read more News here
Investments in virtual currencies are high-risk investments with the risk of total loss of the investment and you should not invest in virtual currencies unless you understand the risks involved with such investments. No information provided in this article or any attachments shall constitute investment advice. Crypto Finance AG excludes its liability for any losses arising from the use of, or reliance on, information provided in this article or any attachments.