Trakx Weekly Update: Large Caps Lead The Way

Key Crypto Market Figures

CTIs Weekly Performance

Digital asset markets delivered a mixed performance last week, with gains concentrated in large-cap tokens after softer-than-expected US inflation data boosted investor sentiment. Smaller-cap tokens, by contrast, lagged. As a result, our flagship Top 10 Crypto CTI gained just over 1%, making it the second-best performer behind the Bitcoin/Ether CTI, which gained 2.5%. At the other end of the performance table, the AI Agents, Recovery and Gaming CTIs were the weakest performers, each declining by just over 4%.

US Inflation Cools…

Last week’s US June CPI data came in significantly below consensus expectations, with headline inflation falling 0.7 percentage points to 3.5% and core inflation also surprising to the downside, easing to 2.6% from 2.9% previously. While both measures remain above the Fed’s 2% target, the report marked a notable shift after four consecutive months of accelerating inflation. The improvement came despite higher crude oil prices following the resumption of airstrikes and the reimposition of the US blockade of the Strait of Hormuz. Following the release, investors concluded that immediate pressure on the Fed to raise interest rates had eased. As a result, US short-term interest rate futures repriced sharply, with the implied probability of a rate hike at the end-of-month FOMC meeting falling from around 35% to just 8%. This significant reassessment of the near-term policy outlook provided a strong tailwind for risk assets, helping propel digital asset prices more than 4% higher.

… But Not Enough To Sway The Fed

Notably, this bullish price momentum for crypto was not derailed by new Fed Chair Warsh’s first semi-annual Humphrey-Hawkins monetary policy testimony before Congress, which struck an overall hawkish tone. Warsh expressed confidence in the resilience of the US economy while reiterating that restoring inflation to the Fed’s 2% target remains the central bank’s overriding priority. He stressed that policymakers have “no tolerance” for persistently elevated inflation and, although he acknowledged that the June CPI report was encouraging, cautioned that a single favourable reading was insufficient to declare victory. Instead, he said the Fed would need to see sustained evidence that inflation is moving durably lower before altering its policy assessment.

Consistent with his first post-meeting press conference, Warsh also declined to provide forward guidance on the likely path of the federal funds rate, underscoring his preference for a more data-dependent approach. The move represents a notable departure from the communication strategy adopted by each of his three predecessors, who relied more heavily on forward guidance to shape market expectations.

ETF Inflows And Institutional Demand Return

Beyond the macro backdrop, improving market-specific fundamentals also helped underpin the recovery in digital asset prices. After several sessions of net outflows, US spot Bitcoin ETFs returned to positive territory, recording just under $400mn of net inflows last week, indicative of institutional investors once again adding exposure following the good news on inflation (see above). At the same time, on-chain and derivatives data indicated that much of the recent wave of forced selling had largely run its course, with liquidation activity remaining relatively muted despite continued geopolitical uncertainty. This combination of renewed ETF demand, improving market positioning and easing expectations for further near-term monetary tightening helped reinforce the risk-on sentiment, allowing Bitcoin to reclaim the US$65,000 level and providing broad support across the wider digital asset market.

Sources: Trakx, Coingecko, Alphavantage

Market Trends

• Bitcoin Ticks Up to $64K Following Largest Inflation Slowdown in Six Years: Decrypt
• Bitcoin ETFs add $368M in three-day buying streak: Cointelegraph
• Trump puts Senate on a 24-day clock to find 60 votes for America’s crypto CLARITY Act rulebook: CryptoSlate
• Japan’s Landmark Vote Reclassifies Bitcoin And Crypto As Financial Assets: Bitcoin Magazine
• Canton Joins 54-Firm UK Wholesale Tokenisation Taskforce: Cantonnews.org
• ECB picks firms including Deutsche Bank, Revolut for digital euro pilot: CoinDesk
• Bitcoin Q-Day Recovery Proposal Aims to Let Users Prove Ownership After Quantum Attack: Decrypt

Trakx CTIs Performance

Sources: Coingecko and AlphaVantage

*Return of bitcoin is calculated since 01/05/2020, while CTIs performances were calculated since their respective launch date.
**Includes simulated performance.
***The risk signal is determined according to the historical volatility level, the higher the riskier.

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Disclaimers: No Investment Advice. Index returns and statistics are for illustration only. Index returns do not reflect any transaction costs or expenses. Past performance does not guarantee future results. The information provided in this newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the newsletter content as such. Trakx.io does not recommend that any cryptocurrency should be bought, sold, or held by you. Readers shall conduct their own due diligence and consult their financial advisors before making any investment decisions.