July 2025 in Crypto: Prices rally on US regulatory clarity and renewed fiscal fears

Another month in the history books and another green month for digital assets as evidenced by the 25% rally in our flagship large cap Top10 Crypto CTI – gains aided by investors loading up on Bitcoin helping propel it to a new all-time high above $122,000. As a result, Bitcoin is now the world’s fifth-largest asset by market capitalization, surpassing Amazon with a valuation of $2.4 trillion. This milestone also pushed the total crypto market cap just under $4 trillion — a new all-time high.

As in previous months, institutional investor appetite for crypto products continued to be very robust, with a record $2.2 billion pouring into US spot Bitcoin ETFs during a single two-day stretch between July 10-11, taking total asset under management (AUM) globally to over $150 billion – see image. However, it was not just Bitcoin that witnessed robust institutional demand.

Bitcoin Spot ETF AUM

Source: The Block

Spot Ethereum ETFs have tended to played second fiddle relative to their Bitcoin equivalents, attracting little over $5 billion in AUM in their first seven months (5X lower than Bitcoin ETFs at the same stage). However, July saw a sharp turnaround, with net inflows of over $5 billion, the strongest since launch, driven largely by BlackRock’s ETHA fund.

Ethereum Spot ETF AUM

Source: The Block

A more focused Ethereum Foundation — following a recent reorganization — along with the creation of several Ethereum treasury companies, helped lift both sentiment and ETH prices. This contributed to a 32% monthly gain in our equal-weighted Bitcoin/Ether CTI. Ethereum also retained its lead in wallet adoption, with 152 million non-empty addresses — more than any other crypto asset.

Maybe, just maybe, alt-coin season has finally arrived?!?!?!

Regulatory Clarity

This increased crypto appetite by institutional investors is the result of two key trends. First, greater regulatory clarity for digital assets in the US following last month’s “Crypto Week”, so-named by the House of Representatives in recognition of the fact that three major pieces of digital asset legislation were being debated: the Anti-CBDC Surveillance Act, the CLARITY Act, and the GENIUS Act.

Despite the hype, “Crypto Week” did not disappoint. After a failed vote early on, the House narrowly voted 217–212 in favour of a resolution to reconsider the bills, following a record-breaking 10 hours of debate. The vote may have been procedural in nature but it signalled there were enough Republican votes to pass the legislation. Progress was also helped by the decision to attach the Anti-CBDC Surveillance State Act to the National Defense Authorization Act, which overcame objections from eight Republican holdouts.

Consequently, the GENIUS Act—which had passed in the Senate a week or so earlier —was brought to a floor vote on July 17 and passed by a solid 308–122 majority. The legislation landed on President Trump’s desk the very next day and with the stroke of a pen he became the first US President to sign into law a major piece of digital asset legislation. The second crypto bill – the CLARITY Act – passed the same day with almost the same degree of support (294–134 majority). As the name suggests, last month’s legislative actions brings much-needed legal clarity to digital assets in the US—a “must have” for heavily regulated tradfi players whose involvement is essential for widespread adoption of the asset class.

Fiscal Fears Mount

The second driver was mounting investor concern about the unsustainable nature of government deficits, ballooning debt loads, and growing interest costs, which raised fears that traditional “safe assets” like government bonds may no longer offer the same level of security. Indeed, given the ratcheting up of longer dated government bond yields witnessed in many countries (notably Japan), some market analysts have even begun to question whether we are headed for a crisis in developed bond markets – see image.

Source: X

Adding fuel to the sovereign bond crisis fire, so to speak, were rumors that Trump was on the cusp of firing Fed Chair Powell, a man the US president has been highly critical of for keeping interest rates at levels he considers punitively high given the level of inflation and which is costing US tax payers trillions of dollars every year (net interest payments constitute 17% of overall federal tax revenues).

Commenting on Powell’s prospects, US Treasury Secretary Bessent said a formal process to identify a nominee for Fed Chair was already underway 10 months prior to Powell’s term officially expiring¹. While Bessent’s comments didn’t explicitly signal Powell would be pushed out before the May 2026 deadline, the probability of him vacating the role of Fed Chair before year-end jumped to almost 35% on Polymarket—the prediction platform that correctly called the 2024 Presidential election (unlike many professional pollsters).

Odds of Trump removing Jerome Powell in 2025

Source: Polymarket

Interestingly, one potential candidate being discussed as a possible Powell replacement is Bessent himself. Moreover, he may not even have to relinquish his role as Treasury Secretary to take the job because there is no law banning such a dual role. Naturally, if this were to occur, it would be a complete anathema to believers in operationally independent central banks but it is worth noting that contrary to what the majority of economists believe no central bank is ever truly independent. That is the invaluable lesson of history – something Bitcoin creator Satoshi Nakamoto was only too well aware of. Additionally, when it comes to the “fiscal tail wagging the monetary dog”, the US has form.

As I have noted in prior research notes, between the mid-1930s until the Fed-Treasury Accord of 1951 the Fed implemented a cap on government bond yields ostensibly to facilitate war-time financing but in reality it was a policy to ensure the ongoing solvency of the US government the last time its debt/GDP ratio was firmly in triple digits (124% currently) – see image.

US Federal Debt/GDP Ratio

Source: www.longtermtrends.net

Such overt political pressure being brought to bear on the Fed (and its leadership) has certainly attracted the attention of investors, and not only in crypto. The gold price is back at record highs and silver – the other historically popular form of commodity money – is quickly closing the gap to its previous spike highs seen in early 1980 and 2011, which is testament to growing concern that the policy regime has shifted from one of monetary dominance to fiscal dominance (or in the memetic words of Lyn Alden “Nothing Stops This Train” – see image).

Source: X

As the above meme implies, such regime shifts do not happen frequently. Consequently, when they do occur many investors are caught off-guard. Most at risk are those who take the view that history is linear. Such a mindset not only fosters complacency but also the belief that crises of the past can’t recur. In contrast, a cyclical perspective, common among crypto investors, anticipates that history “rhymes,” making them more alert to risks.

Fourth Turnings Redux

Indeed, there is a strong thread in the crypto community that believes Bitcoin is the perfect money during so-called Fourth Turnings, which I discussed in a research note published in late 2023. For those that haven’t read the note and are unfamiliar with the concept of Fourth Turnings, they represent the final epoch in the Strauss-Howe generational theory which posits that nation-states experience 80-year long cycles called saeculums, each of which comprises four epochs. The first epoch is labeled a “high”, followed by an “awakening”, an “unraveling” before culminating in “crisis”. While the names appear to be a bit “woo-woo”, Strauss and Howe argued their theory was well-supported by hard data going back centuries.

Consistent with their nomenclature, fourth turnings are characterized by a period of upheaval where institutions are destroyed during a period of conflict but are then subsequently rebuilt, laying the foundations for the start of a new saeculum and a return to the “high”. Think of it as an era of creative destruction if you like. Their book The Fourth Turning: An American Prophecy was published just prior to the bursting of the dotcom bubble, and a decade before the Great Financial Crisis (GFC). Consequently, a lot of investors became convinced that their cyclical read of history was the correct one and it became a popular framework for anticipating long-run socio-economic trends and, more importantly, identifying turning points – something other mainstream theories typically fail to deliver.

In the book, Strauss and Howe predicted that the Fourth Turning would end this year ie 2025. However, Howe (the only surviving author of the original 1997 book) pushed out this predicted date to “sometime before the mid-2030s” in his follow-up book, published in 2023. Those of a sceptical disposition may see this pushing out of the window for the ending of the Fourth Turning as nothing more than a ploy to stop the original prediction being falsified (a trick common with many The End Of The World Is Nigh predictions – see image).

Source: chatgpt

Be that as it may, their framework strongly suggests we are currently in such a crisis phase — marked by institutional breakdown and profound social change — which is consistent with today’s political and financial turbulence. The heavy criticism of the Fed by the Trump administration is just one prime example that should be considered emblematic of a deeper, longer trend of public dissatisfaction towards US institutions.

According to an article in the Fall 2024 edition of Trend Magazine published by the Pew Institute, confidence in major US institutions has dropped precipitously over recent decades to a forty year low– see chart.

Source: Pew Institute

While erosion of trust is quite widespread, it is political institutions where the decline has been most severe with 57% of American voters expressing very little confidence in Congress (with mainstream media a close second) – see image.

Source: Gallup

Moreover, the loss of public confidence in politicians is not just a US phenomenon, it has been falling around the world, especially in advanced countries. For example, a recent survey of 24 global leaders showed only seven had net positive approval ratings. Of the other 16, the most unpopular leaders were in the Czech Republic, France, Japan and the UK².

This confidence slump is critical because it undermines a core principle of political philosophy, namely that the consent of the people is required for legitimacy, and without it the job of governing becomes much harder as has been amply demonstrated in the UK recently.

U-Turn UK

In the 2024 general election, the Labour Party trounced the Conservatives winning 411 parliamentary seats out of a total of 650. With such a thumping majority (156³) the new Labour government should have been able to pass any legislation it desired. Yet, PM Starmer has struggled to get key bills through parliament. Indeed, his leadership has been plagued by policy U-turn after policy U-turn, including last month’s humiliating climbdown on his welfare bill, policy concessions that mean Chancellor Reeves has to find an additional £5bn in savings, which will almost certainly come via higher taxes. (Little wonder she was filmed in tears during the weekly Prime Ministers Question Time – footage that certainly rattled investors in tradfi sterling assets.)

Many other governments find themselves in a similar position to the UK. Returning to the US for a second, after being triggered by Trump’s “big, beautiful bill” Musk decided to step down as head of the Department of Government Efficiency. Yet, even prior to his departure, there was scant evidence of his department moving the dial when it comes to reining in US government spending – see image.

Cumulative US Federal Government Spending

Source: US Treasury Dept and CBO

France is in an even more precarious position, so much so, that PM Bayrou last month proposed cutting the number of public holidays from 11 to 9 on the grounds that…

“… [t]his change to our holiday calendar will bring in billions to the state budget, simply because businesses, shops, the civil service and the nation will be working and our production will be improved.”

Laudable though this proposal is, its passage through the French parliament will be far from plain sailing given it is being put forward by a PM who does not have a parliamentary majority and has already faced eight no-confidence motions (roughly one for each month of his premiership).

Worst of all though is Japan, the country with the highest government debt load in the developed world (over 230% of GP). During last month’s Upper House election, the ruling coalition government led by PM Shigeru Ishiba’s LDP lost its majority due to a surge in support for the right-leaning Sanseito Party and its “Japanese First” policy (strong echoes of Trump) – a clear sign of voter frustration with the established political parties.

A Toxic Mix (But Not For Crypto)

Such fiscal incontinence, combined with eroded trust in governments – two hallmarks of a Fourth Turning – is a potentially toxic mix for investor confidence. In the absence of a credible plan to curtail government spending and lower future budget deficits, investors can very easily be spooked into fearing either an outright default or more likely the central bank being coerced into firing up the printing press to inflate the debt away. This Printer Go Brrr meme – see image – is one of the most popular in the crypto world and a key reason why many people get into digital assets in the first place. Hence, it is no surprise when, as now, this narrative gains traction we see a resurgence in digital asset prices.

Printer Go Brrr

Source: X

Unless governments can find a way to restore their credibility with the public, and quickly (the UK government is jumping on the AI bandwagon and considering creating AI chatbot focus groups to road test policies – talk about desperate measures for desperate times), the outlook for cryptocurrencies, particularly store-of-value tokens, remains assuredly bullish.

1 Powell’s term as Fed governor runs until 2028, but traditional dictates that the Fed chair also steps down as governor to avoid muddying the waters for the incoming Chair.

2 For those interested, Donald Trump was placed eighth, with a modestly negative net approval rating while the most popular leader, with a net approval reading of +53%, was India’s Narenda Modi.

3 That is the majority at the time of writing not the 2024 election because there due to resignation or suspensions of several Labour MPs – see: https://www.instituteforgovernment.org.uk/explainer/government-majority