As August ushers in thinner trading volumes and reduced liquidity, a combination that has historically produced elevated volatility across markets. The SPY/TLT ratio just posted its worst equity performance relative to bonds since Liberation Day, and the effects have spilled into crypto as well, dragging Bitcoin and altcoins lower.

Crypto may be enduring a short-term shakeout, but the broader macro picture could be quietly setting the stage for another leg higher.

Here’s what we’ll cover today:

Let’s get into it.

The equity market experienced its worst performance relative to bonds since Liberation Day, with the SPY/TLT ratio taking a sharp dive in recent weeks. August historically presents seasonal headwinds for risk assets as trading volumes thin with many institutional players on vacation, creating amplified volatility and reduced liquidity that can exaggerate market moves.

This has spilled over into crypto markets and contributed to the recent Bitcoin and altcoin selloff.

Consumer price inflation has continued its gradual descent throughout 2025, providing the Federal Reserve with increased policy flexibility at a critical juncture. Meanwhile, job growth has decelerated significantly from the robust levels seen in early 2024, with the three-month moving average showing a clear downward trajectory. The disinflationary trend removes a key barrier to Fed accommodation while employment weakness provides the justification for more aggressive policy support.

The yield curve steepening between 2-year and 30-year treasuries has accelerated following recent soft employment data, with the spread reaching multi-month highs around 100 basis points. This steepening typically occurs when markets anticipate near-term rate cuts combined with longer-term growth expectations, potentially suggesting optimism about the Fed's ability to engineer a soft landing.

Market expectations for Federal Reserve rate cuts have surged dramatically, with swaps now pricing 61 basis points of easing by the December FOMC meeting. This represents a significant shift from earlier in the year when markets anticipated a more gradual policy normalization. 

With Bitcoin losing support at the range lows around $116,900, the Crypto Fear and Greed Index has reset back into neutral territory, currently showing a reading of 52. In our view, this represents a healthy market reset and supports the interpretation that we are seeing a correction within a broader bullish trend, not a shift in market structure or a turn toward bearish conditions. 

This allows us to maintain a bullish outlook on crypto and other risk assets heading into the third quarter.

Total Bitcoin Spot ETF flows closed last week with notable outflows on Friday, exceeding $800 million across all major products. As previously outlined, seasonal weakness in August is not unusual. Provided this trend doesn’t accelerate and flows turn positive again this week, we see no reason to abandon our bullish thesis.

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Key events this week include several important U.S. economic data releases and bond auctions. On Monday, there are no major scheduled data releases. Tuesday brings U.S. Services PMI and ISM Non-Manufacturing PMI, key indicators of the strength of the service sector. On Wednesday, attention turns to U.S. Crude Oil Inventories and the 10-Year Treasury Note Auction, both of which offer insight into inflation and market liquidity. Thursday features U.S. Initial and Continuing Jobless Claims as well as the 30-Year Treasury Bond Auction, which will be closely watched for signs of investor demand and rate expectations. There are no scheduled high-impact events on Friday.

The most critical events for crypto this week are the U.S. Services PMI and ISM Non-Manufacturing PMI on Tuesday, as they will offer clues about the resilience of the U.S. economy and shape expectations around Federal Reserve policy going forward. While no central bank decisions are on deck, bond market activity through midweek auctions may indirectly affect risk sentiment.

What to watch in Tuesday’s data:

Crypto investors should monitor service-sector strength and bond market demand this week. The combination of economic data and Treasury auctions will likely shape sentiment and volatility across risk assets as we move deeper into August.

Bitcoin failed to hold above $115,300 and sold off further, dropping to the previous key level of $111,900, where price found support and showed a bullish reaction. Price has since reclaimed the $113,300 support level and is now moving back toward $115,300.

The one-week Bitcoin liquidation heatmap currently paints a bullish picture, showing a significant cluster of leveraged liquidations above at $120,000, suggesting the possibility that market makers may aim to push price toward that level. However, further downside remains possible, as a small cluster of liquidations is also forming on the downside around $111,800.

Bullish Scenario
In the bullish case, Bitcoin needs to demonstrate strength and bullish momentum, ideally trending higher toward previously lost key levels. Long opportunities arise after a successful reclaim and bullish retest of $115,300, targeting the next key level at $116,900, with invalidation if price drops back below the entry level.

Bearish Scenario
In the bearish case, Bitcoin fails to trend higher and faces rejection again. Short opportunities emerge on a successful bearish retest of $115,300, targeting $113,300, with invalidation if price reclaims the entry level.

With Bitcoin trending lower, the collective altcoin market also took a dive last week. While TOTAL3 fell below the key level of 950B on Saturday, it reclaimed that important level by Sunday and is now slowly grinding higher again, showing signs of healing.

As long as this key level holds, we can anticipate further upside and ideally a push back above the 1.05 Trillion mark, setting the stage for notable returns in leading altcoins and a bullish trend continuation. As mentioned in last week's report and consistently throughout the past quarter, we are still not favoring lower-cap altcoins or high-risk assets, but instead focusing on clear high-cap leaders and established bets.

Corrections like these reinforce the value of this risk-limiting approach and further confirm that this remains the right strategy for now, staying Bitcoin-heavy while selectively allocating to top altcoins.

We hope this report provided you with valuable insights into the latest market developments and geopolitical shifts.

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