Weekly Market Recap
Last week, risk sentiment remained defensive as several pressures hit markets at the same time. The total cryptocurrency market capitalization pulled back from roughly $2.25 trillion to $2.16 trillion, while Nasdaq failed to reclaim the 29,259 dark pool and sold off into 28,268.
The largest source of uncertainty was the continued conflict between the United States and Iran. Repeated military exchanges, threats against major shipping routes and concerns over disruptions through the Strait of Hormuz and Red Sea pushed oil prices sharply higher. Rising oil weighs on sentiment because it increases costs across the economy and raises the risk that inflation remains elevated.
Stronger U.S. economic data added further pressure. Business activity improved in July, hiring strengthened and services growth accelerated, while supply disruptions pushed input costs higher. Although stronger growth is normally positive, it gave the Federal Reserve less reason to lower interest rates while energy driven inflation risks were increasing. That combination helped push Treasury yields higher and pressured technology, crypto and other rate sensitive assets.
Technology sentiment also weakened after Alphabet and Tesla earnings renewed concerns about heavy AI spending. Investors began questioning how quickly record capital expenditures would translate into meaningful profits, causing a broader reassessment of elevated technology valuations ahead of earnings from other major companies. The Nasdaq ultimately finished the week down roughly 2.1%.
A more hawkish Bank of Japan also remained a background risk. Expectations for additional Japanese rate increases raised concerns that yen-funded carry trades could gradually unwind, potentially forcing investors to reduce exposure to global risk assets.
Overall, the market faced higher oil prices, stronger inflation risks, fewer reasons for central bank easing, uncertainty surrounding AI returns and escalating geopolitical tensions. With Nasdaq unable to reclaim 29,259, sellers maintained control and risk assets continued moving toward lower areas of liquidity.
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Middle East Update๐ฅ
What Markets Need to Watch This Week outside of FOMC ๐
Picking up from friday and what happened this weekend geopolitical tensions remained relatively contained over the weekend despite the funeral ceremonies for former Iranian Supreme Leader Ali Khamenei entering their second day. Millions attended the processions across Iran, with chants calling for revenge against the United States and Israel, but importantly no military action has occurred so far. President Trump stated that there would be no attacks during the funeral proceedings, and negotiations with Iran are expected to resume after the ceremonies conclude, helping markets maintain a more constructive risk tone heading into the new week.
The funeral processions will continue through Thursday, with ceremonies scheduled across Tehran, Qom, Iraq and concluding in Mashhad. This remains the primary geopolitical risk to monitor. Any military strike, retaliation, or breakdown in the current pause during the funeral period could quickly reverse the recent improvement in risk sentiment and pressure both crypto and equity markets. On the other hand, if the funeral concludes without escalation and U.S.-Iran negotiations resume with constructive headlines, it would reinforce the current optimism that has supported risk assets over the past week.
Another event worth watching is the expected meeting between President Trump and Israeli Prime Minister Benjamin Netanyahu in the United States. While no official policy announcements have been released yet, markets will be listening closely for any comments regarding Iran, ceasefire conditions, future negotiations, or U.S. support for Israel.
Any indication that diplomacy remains the preferred path would likely support risk appetite, while a more confrontational tone or signs of renewed military action could quickly bring geopolitical risk back into financial markets.
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MUST READ ๐ฏ ๐๐ฝ $XRP $BTC
Today Cryptocurrency markets found strong support and added more than $60 billion in market capitalization.
The primary reason was a small shift in interest rate expectations.
The weak pay roll report reduces pressure on the Federal Reserve to tighten monetary policy further. While Chair Kevin Warsh has repeatedly emphasized that inflation remains the Fed's primary focus, today's employment data reduced expectations for additional rate hikes and reinforced the possibility that policy could remain on hold if inflation continues to moderate.
For digital assets, that matters because crypto is highly sensitive to liquidity conditions. Lower expectations for aggressive tightening improve the outlook for financial conditions, weaken upward pressure on real yields, and generally encourage investors to move back toward higher-risk assets at least for now.
Buyers defended the $2.05 trillion dark pool, suggesting larger participants viewed the recent correction as an attractive accumulation opportunity.
For crypto, the market is focused primarily on monetary policy. Slower hiring and stable wage growth strengthened expectations that financial conditions may gradually become less restrictive over time, which today supported digital assets.
Looking Ahead
Attention now shifts toward the CPI & PPI reports in days ahead, which could become the next major catalyst.
If inflation continues to ease while the labor market slows gradually, the soft-landing narrative would likely strengthen, supporting both crypto and broader risk assets.
However, if inflation remains sticky despite weaker hiring, Chair Warsh is unlikely to change his inflation-focused stance, keeping monetary policy restrictive for longer and potentially limiting upside across financial markets.
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The next race in crypto won't just be about speed or scalability.
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