Key Takeaways

• Geopolitical risks are easing, with the Israel - Iran ceasefire stabilizing markets. Worries about tariffs are diminishing, and downward pressure on inflation is more likely to support a Federal Reserve rate cut.

• The success and high valuation of Polymarket highlight the market's focus on consumer - centric applications, particularly prediction markets, whose momentum is poised to accelerate.

Market OverviewAre Geopolitical Risks Fading?

Since the ceasefire agreement between Israel and Iran on June 23rd, market sentiment has stabilized, with the COIN50 Index and US stocks rebounding together. In fact, the 25 delta put - call skew of Bitcoin 30 - day options, which surged last week, has begun to decline, while the skew for 90 - day and 180 - day contracts remains in negative territory.

This indicates that the market's demand for downside protection from short - term Bitcoin put options has eased. We believe that the longer - term options show investors' desire to gain exposure to Bitcoin without paying the upfront costs of the spot market, reflecting a slight bias towards out - of - the - money call options. The implied volatility of 1 - week and 1 - month contracts has dropped significantly, reducing the attractiveness of selling volatility at this time.

Nevertheless, there remains lingering uncertainty about whether tensions could flare up again. Looking ahead, we believe the most likely potential scenarios include:

• Maintaining the status quo, characterized by a fragile and tense balance, with Iran continuing to use its nuclear program and regional proxies to project influence, essentially buying time without crossing clear red lines.

• A second, more severe scenario involves limited military escalation, given Israel's residual concerns about Iran's nuclear capabilities.

Closing the Strait of Hormuz (which handles one - fifth of the world's oil consumption) would be a major red line indicating conflict escalation. However, we believe this is unlikely to happen, as the ceasefire has reduced this threat and such an action would severely damage Iran's own economy. Therefore, we think that buying dips on geopolitical events remains a viable market strategy for now, consistent with our latest monthly outlook.

What About Tariffs?

Despite the approaching July 9th deadline for suspending reciprocal tariffs (August 12th for China), significant progress on trade agreements has not been made - although a rare - earth transportation agreement with China has been reached and a proposal has been submitted to the EU. However, both traditional and crypto markets have largely ignored the potential economic risks arising from this, partly because it has not been reflected in economic data.

Federal Reserve Chair Powell testified before the House Financial Services Committee and the Senate Banking Committee this week, stating that inflation could still be affected by tariffs later this summer. (It is worth noting that President Trump subsequently announced that he might appoint Powell's successor as early as September or October this year.)

But remember, goods only account for about 20 - 25% of the core CPI basket, and it is not yet clear whether companies will fully pass on the tariff costs to consumers. Moreover, service prices have been declining since mid - 2024 and are more sensitive to long - term developments such as artificial intelligence in the long run. In fact, we believe the impact of tariffs is more likely to be deflationary due to their net effect on aggregate demand. In our view, this will continue to drive the Federal Reserve to cut rates in the second half of this year. All of this may explain the market's complacency towards tariffs, which we think could persist until the upcoming deadline. Ultimately, we believe trade barriers will not pose a significant risk to our constructive outlook for the third quarter of 2025.

Regulatory Updates

The Guidance and Establishment of a National Innovation Act for US Stablecoins (GENIUS Act) has passed in the US Senate with a 68 - 30 vote and is currently under review in the House of Representatives. House Majority Whip Tom Emmer (R - Indiana) is attempting to merge this bill with the CLARITY Act (House Market Structure Act), but the process may be delayed due to the complexity of the latter's content. It is worth noting that President Trump has called on the House to pass the GENIUS Act "without delay or addition." Additionally, Senate Banking Committee Chair Senator Tim Scott (R - South Carolina) has stated that a crypto market structure bill is expected to be completed by September 30th.

Furthermore, on June 23rd, Senator Adam Schiff (D - California) introduced the Curbing Officials' Income and Nondisclosure Act (COIN Act), which aims to restrict the ability of senior executive branch officials and their immediate family members to issue, sponsor, or endorse digital assets.

Meanwhile, the Federal Reserve announced this week that it will no longer consider reputational risk as a component of its bank supervision and examination program. This seems to be a continuation of the current administration's deregulation under the "Operation Chokepoint 2.0" policy. Given the subjectivity of "reputational risk," the previous guidelines had led to the systematic exclusion of the crypto industry by banks.

Polymarket: The Crypto Realm's Newest Unicorn?

This week, the decentralized prediction market platform Polymarket sought a valuation of around $1 billion, led by Founders Fund, to become the latest unicorn in the crypto space.

Just a day later, its regulated competitor Kalshi announced a $185 million funding round at a $2 billion valuation.

These deals together indicate that the focus of venture capital this week is on distribution moats (consumer - facing applications) rather than liquidity moats (token chains and DEXs), with real - time event markets taking the lead.

Driving the valuations is its strong usage metrics. Despite regulatory barriers preventing US users from trading, Polymarket's total trading volume has exceeded $14 billion, with approximately $1 billion in May alone. The platform averages 20,000 to 30,000 traders per day, surpassing many mid - cap DEXs, demonstrating its ability to attract a non - crypto - native audience.

With a new content partnership with X (formerly Twitter), positioning prediction markets as viral social content rather than purely financial instruments, its momentum is expected to further accelerate.

Stablecoins - particularly USDC - are its invisible beneficiaries.

Polymarket's trades are settled in USDC on Polygon, and these stablecoin flows are reflected in on - chain metrics. For example, in November 2024, when headline - grabbing events drew market attention, monthly trading volume surged to $2.5 billion, triggering a spike in USDC transfers and cross - chain bridge activity. Unlike lending protocols that lock up large amounts of total locked value (TVL), prediction markets have fast - moving funds and high - frequency settlement activities that drive a large volume of on - chain payment behavior.

Coinbase Exchange and CES Insights

This week, in the crypto market, Bitcoin held steady at the $100,000 mark, while the broader market remained in a consolidation phase.

On the housing market front, the US housing mortgage regulator issued an order requiring Fannie Mae and Freddie Mac to consider cryptocurrency holdings as assets when assessing mortgage loan risks. We also witnessed continuous inflows into spot BTC and ETH ETFs, with Invesco submitting its application for a spot SOL ETF, marking the ninth application so far.

All of these factors, coupled with the ongoing tensions in the Middle East and comments from Federal Reserve Chair Powell, have kept traders in a constructive mindset. Perpetual contract funding rates are in the mid - to - low single digits, and positions appear relatively neutral, which could leave room for further upside movement.