Matrixport Investment Research: The Economic Logic Behind the Summer Consolidation

BTC's upward momentum is waning as cracks begin to appear in the US macroeconomic backdrop as well. Two key economic indicators have just fallen to their lowest levels in months, but most investors are still focused on ETF money flows upward. Looking at the current data, fundraising dynamics, stablecoin activity, and forward-looking data all suggest that the market may be shifting.

As of the time of writing, early signs of consolidation in the crypto market began to appear (BTC retraced 3%, ETH retraced 4%, SOL retraced 11%), and U.S. macroeconomic data began to soften, increasing market uncertainty significantly. The recent strength in demand is likely due to a temporary surge in pre-orders on the eve of Trump's expected tariffs – a trend that looks poised to return to normal for now.

The PMI data contracted moderately, and the economy cannot be ruled out slipping into contraction territory

Since the services sector accounts for about 80% of US GDP, we can roughly conclude that the ISM non-manufacturing PMI (services) index is more correlated with the overall US economy. While economists had expected the index to rebound from last month's data, its actual performance was disappointing, falling to its lowest level since July 2024, suggesting a modest contraction. Overall, the weakening of both manufacturing and services (non-manufacturing) PMIs suggests that the economic data not only fell short of Wall Street's expectations, but is slipping further into contraction territory.

Focus on macroeconomic indicators and wait for interest rate cuts to landFrom

macroeconomic perspective, the two key indicators to pay attention to are oil prices and the US dollar. The decline in oil prices could signal a weaker overall economy, while a continued weakening of the US dollar could gradually prepare the market for future rate cuts. However, with bond yields still range-bound, markets may have to accept the reality that the Fed may hold its ground for longer than expected. Policymakers may be concerned about tariffs re-triggering inflationary pressures, so they are reluctant to ease policy too soon.

However, there is an additional layer of risk in the market this time around – economic data could deteriorate significantly due to the knock-on effects of tariff policy, causing confusion and hesitation among investors. With early signs of weakness in economic data starting to emerge, we may be heading for more than two months of economic turmoil. In such a market environment, it is unlikely that BTC will continue to rise undisturbed, especially if the Fed is not ready to cut interest rates and inflation expectations remain high.

Disclaimer: The market is risky, and you need to be cautious when investing. This article does not constitute investment advice. Digital asset trading can be extremely risky and volatile. Investment decisions should be made after careful consideration of personal circumstances and consultation with a financial professional. Matrixport is not responsible for any investment decisions based on the information provided herein.