Market update - July 11th, 2025

Inflation risks mount as Bitcoin moves towards institutional adoption

As US President Donald Trump’s 90-day trade tariff reprieve comes to an end, markets are bracing for renewed inflationary pressures. While the US economy has shown resilience in recent months, including a stronger-than-expected June jobs report, the risk of a summer inflation spike is increasing. The Federal Reserve remains cautious according to the published minutes, with the majority of FOMC members signalling they can afford to wait before cutting interest rates, despite political pressure and President Trump’s calls for a 200–300 basis point cut.

Tariff-related price increases from earlier trade policies typically take around three months to materialise. This cycle appears no different. Businesses, anticipating new tariffs, stocked up on inventory, delaying the full inflationary impact. However, that buffer is likely to run out by late summer, and we expect July, August, and September CPI readings to reflect this, with potential month-on-month inflation of 0.4–0.5%.

Although inflation readings in recent months have been tame, the Fed remains wary of repeating its 2022 mistake when it underestimated the persistence of inflation. Unless there is a clear deterioration in employment conditions, a rate cut at the September FOMC meeting appears increasingly unlikely. That could exacerbate tensions between the White House and the Fed, particularly with Trump seeking a more dovish replacement for Jerome Powell when his term ends next year.

Meanwhile, the “One Big Beautiful Bill Act,” which makes the 2017 tax cuts permanent and introduces new tax breaks, is projected to increase federal debt without materially boosting growth. In fact, the legislation could act as a net drag on economic activity by 2026 due to offsetting spending cuts, particularly those affecting low-income households. As such, the longer-term trajectory may still require the Fed to ease more in 2026 than currently anticipated. Offsetting this is the imminent vote of the GENIUS Act on July 14th in the House of Representatives, likely being a net economic positive for the US in the medium to long term. It brings regulatory clarity, legitimises stablecoins and digital asset infrastructure, and may unlock capital flows into tokenized finance.

In the Bitcoin space, the initial rally to US$111,000 looked to be more closely linked to loosening monetary policy expectations in the futures market, although the push through the all-time-highs is implying it has spurred much greater price momentum. The basis looks much more attractive at present and a likely contributor to this more recent move along with a short squeeze and the building hype surrounding the GENIUS Act.

We are also seeing a significant structural shift in investor behaviour. The share of BTC held on exchanges has fallen from a peak of 18% in June 2022 to just 14% today, reducing exchange supply by US$65 billion. OTC desk holdings have also dried up, and daily spot trading volumes have fallen from US$15 billion to US$6 billion since the start of the year. However, this decline is mirrored by US$68 billion in flows into Bitcoin ETFs, suggesting capital is not exiting the space but rather migrating to regulated and institutionally preferred vehicles. This shift in custody and trading venues may mark a maturing phase for Bitcoin as an institutional asset, even as macro uncertainty and inflation expectations remain persistent.