Rate Cut Bets Rise

Daily Updates:

• After Friday’s sober warning that the labour market may not be as solid as originally thought, a sharp pullback was experienced across US equity and crypto markets. 
• Yesterday, however, US equities shrugged off the economic worries of the US labour market and a surge of dip buying pushed the S&P 500 to close 1.47% higher – that advance was broad based too, with 85% of the companies in the index closing higher. The Nasdaq-100 rallied harder, ending the day at 1.87%, while the Russel-2000 index outperformed (+2.10%). 
• The moves on both Friday and Monday highlight a tug-of-war that market participants are currently facing. Weaker economic data from the US bolsters the case for earlier and more rate cuts than previously expected, while a slowdown in the US labour market, alongside the already existing signs of slowing US GDP growth and consumer spending, are a negative for S&P 500 companies. 

‍

• The move higher was accompanied by ever higher odds of a rate cut in the FOMC’s next meeting in September. Market implied odds of a 25bps cut increased from 80.3% on Aug 1, 2025 to 90.1% yesterday, according to Fed funds futures contracts. 
• Speaking with Reuters, San Francisco Fed President Mary Daly said “I was willing to wait another cycle, but I can’t wait forever.” While Daly was comfortable with the July pause, she is “increasingly less comfortable with making that decision again and again.”
• Additionally, although a September rate cut is not a lock yet, the two 25bps cuts that the Fed dot plot in the June meeting suggested as a median path, still "look to be an appropriate amount of recalibration”. However “less important is, does it happen in September and December than does it happen at all...there's all kinds of permutations to get those two cuts."
• Daly did warn that "We of course could do fewer than two if inflation picks up and spills over or if the labour market springs back", but “the more likely thing is that we might have to do more than two” if the labour market “looks to be entering that period of weakness”. 
• For now, the July data doesn’t mean the job market is “precariously weak”, as the unemployment rate ticked up only a tenth of a percentage point, however there is "evidence after piece of evidence" that the labour market is softening.

‍

• Over the past 24 hours, crypto spot price returns have been very mixed. BTC is trading down at -0.38%, having fallen from $115K last evening to a lower $113K earlier today. 
• In comparison, both ETH and SOL are up 1.8% and 2%, respectively. 
• After having their second largest day of outflows since launch on Friday, Spot BTC ETFs continue a three-day streak of selling, with $323.5M of outflows yesterday. 
• Equally, Spot ETH ETFs also saw another day of outflows – in fact, since their launch on July 23, 2024, yesterday marked the largest single-day of outflows from the Spot Ethereum products since their launch ($465.1M in outflows). 
• Despite those outflows in Spot ETFs, sentiment in derivatives markets has picked up slightly. Both BTC and ETH funding rates have snapped out of their negative ranges with BTC funding rates touching just shy of 0.01% on an eight-hourly basis – a reflection that traders are willing to pay a premium, albeit a small one, for leveraged upside exposure. 
• In BTC options markets, volatility smiles remain bearish across the majority of tenors, though the premium assigned to OTM puts relative to yesterday has eased slightly. 

• For ETH, we see a similar story – the put-call skew on 7-day options which reached as low as -12% over the weekend is now at -4%.

‍

• On the tariff front, President Trump said he would be “substantially raising” tariffs on India, which are already at 25%, over the country’s purchases of Russian oil.
• “India is not only buying massive amounts of Russian Oil, they are then, for much of the Oil purchased, selling it on the Open Market for big profits” wrote the President on Truth Social. 

‍

• Bloomberg reported on Monday, the 4th of August, that the SEC has updated its staff guidance on USD stablecoins, allowing certain tokens to be treated as cash equivalents if they feature guaranteed redemption mechanisms and maintain value stability.
• The update follows April’s clarification that “covered” USD stablecoins are not securities, easing compliance for issuers and redeemers.
• Chair Paul Atkins is leading the effort through Project Crypto, which builds on the President’s Working Group recommendations to modernize securities rules and move U.S. financial markets on‑chain.

‍

• Ethereum’s on-chain activity surged in July, with monthly transaction volume hitting $238B, up 70% from June and the highest since December 2021. The network processed a record 46.67M transactions, while its 7-day average approached an all-time high at 1.64M. Active addresses also climbed to 17.55M, the most since May 2021. 

‍

• BlackRock’s iShares Bitcoin Trust (IBIT) recorded a $292.5B outflow on Monday, its steepest since May, according to CoinGlass data. The move follows a minor outflow Friday that ended a 37-day inflow streak.
• Other spot Bitcoin ETFs also saw mixed flows: Fidelity’s FBTC lost $40M, Grayscale’s GBTC shed $10M, while Bitwise’s BITB was the lone gainer with an $18.7M inflow.
• Despite the pullback, IBIT’s July net inflow of $5.2B accounts for 9% of its total inflows since launch in January 2024.

‍

• MEXC Ventures, the investment arm of crypto exchange MEXC, has taken a stake in Triv, one of Indonesia’s oldest crypto exchanges founded in 2015, at a $200M valuation. 
• Triv serves over 3 million registered users and holds full licensing from OJK and BAPPEBTI, offering spot, staking, and futures trading amid competition from Binance’s Tokocrypto and Pantera-backed Pintu. 
• With Indonesia’s monthly crypto volumes between $1.3 and 1.5B, MEXC’s move signals growing confidence in mid-tier, regulated exchanges valued at 20–25x annualized revenue, driven by compliance and growth prospects in Southeast Asia’s expanding market.

‍

• The U.S. Commodity Futures Trading Commission (CFTC) announced yesterday the launch of a new program to allow spot crypto asset contracts to be traded on registered futures exchanges, known as designated contract markets (DCMs). This move is part of the CFTC’s broader “Crypto Sprint” initiative, launched last week to implement recommendations from the White House digital asset report. The program aims to clarify how spot crypto contracts can be listed on DCMs under the CFTC’s existing authority, and the agency is inviting public feedback until 18 August 2025.
• The initiative comes amid ongoing collaboration between the CFTC and Securities and Exchange Commission (SEC) to provide clearer regulatory guidance for the digital asset market, particularly in distinguishing cryptocurrencies as securities or commodities. Acting CFTC Chair Caroline Pham emphasized the agency is moving “full speed ahead” to enable federal-level trading of spot crypto, coordinating closely with the SEC’s Project Crypto.

‍

• Yield-bearing stablecoins have surged since the GENIUS Act became law on July 18, as reported on Monday. 
• Ethena’s USDe supply has jumped 70% to 9.49B, making it the third-largest stablecoin, while Sky’s USDS has risen 23% to 4.81B, now fourth.
• The surge has also driven ENA, Ethena’s governance token, up nearly 60% to $0.58, according to CoinGecko.

This Week’s Calendar:

‍

Charts of the Day:

Figure 1. BTC at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 2. ETH at-the-money implied volatility across selected tenors. Source: Deribit, Block Scholes

Figure 3. BTC 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes

Figure 4. ETH 25-delta put-call skew ratio across selected tenors. Source: Deribit, Block Scholes