Over the past week, the crypto market has seen a remarkable surge, with Bitcoin (BTC) breaking $120,000, hitting a new all-time high, Ethereum (ETH) reclaiming $3,000, leading the altcoin rally, and even approaching its historical high.

Behind this rally, it is evident that it is not just a natural market fluctuation. The confluence of favorable macroeconomic policies is injecting strong momentum into the crypto market: upcoming crypto legislation, Nasdaq hitting new highs, continuous growth in the M2 money supply, expectations of Fed rate cuts, and strong support from Trump.

The convergence of multiple factors has reignited optimism in the crypto market after nearly six months of consolidation, ushering in an unprecedented growth inflection point.

「Crypto Legislation Week」 Initiated, Institutional Funds Add Fuel

This week, as the market eagerly anticipates the 「Crypto Legislation Week,」 several bills will be voted on in the House of Representatives. The 「Digital Asset Market Structure Clarity Act」 has already passed the House Financial Services Committee and the Agriculture Committee on July 2, 2025.

Meanwhile, the 「Guiding and Establishing American Stablecoin Innovation Act」 has entered the House for deliberation and was passed by the Senate on June 17, 2025.

Both bills have received bipartisan support and, if passed, will clearly pave the way for the legalization of crypto assets and stablecoins. A clear regulatory and compliance framework will attract more traditional financial institutions and investors to enter the market.

Specifically, the Clarity Act brings a clear legal framework to the digital asset market, defining which assets should be regulated by the Commodity Futures Trading Commission (CFTC), such as Bitcoin (BTC) and Ethereum (ETH), and which should be overseen by the Securities and Exchange Commission (SEC).

The passage of this bill will address the long-standing regulatory gray areas and end the previous era of SEC's strict regulation of crypto and DeFi. Particularly for institutional investors, clear regulations will provide a more definite path for them to enter the crypto market. Furthermore, it will further promote crypto assets as part of US corporate strategic reserves, leading more mainstream companies to engage in the application and development of blockchain technology.

The Genius Act focuses on the legal protection of stablecoins, allowing banks and non-bank entities to issue stablecoins, regulated by the Federal Reserve System (Fed) and the Office of the Comptroller of the Currency (OCC). The implementation of this policy framework will eliminate regulatory uncertainty around stablecoins and has attracted traditional financial giants such as JPMorgan Chase, Citigroup, and Bank of America to enter the stablecoin market.

The bill requires stablecoin issuers to provide a 1:1 reserve of US dollars or short-term treasuries, meaning the demand for USD stablecoins will significantly increase. It is expected that within the next two years, the stablecoin market will grow from $200 billion to $400-500 billion.

Ethereum, as the core platform for Decentralized Finance (DeFi) and stablecoin issuance, with its smart contract and decentralized advantages, may become the preferred infrastructure for institutional investors.

Data shows that stablecoin transactions represent 60% of the transaction volume on the Ethereum network, and with an increased issuance of stablecoins, this proportion is expected to continue to rise.

According to Chainalysis' report, Wall Street financial institutions' demand for Ethereum is also growing continuously, especially in the development of cross-chain payments and asset management, among other complex financial instruments. These factors will collectively drive further development of the Ethereum ecosystem.

Powell Resignation Rumors Spark Rate Cut Expectations

Recently, rumors about Federal Reserve Chair Jerome Powell potentially resigning under pressure from Trump have drawn widespread market attention. Since June 30, 2025, Trump has openly criticized Powell, accusing him of "costing the nation hundreds of billions of dollars," and has repeatedly called for an immediate rate cut by the Federal Reserve.

On July 1, Powell responded at the European Central Bank forum, suggesting that without Trump's tariff policies, the Fed might have already taken rate cut measures. The market speculates that Trump may nominate a new Federal Reserve Chair, such as Kevin Hassett.

According to the latest forecasts from CME FedWatch and Polymarket, the probability of a Fed rate cut in September exceeds 50%, and a future low-rate environment will release more liquidity, benefiting risk assets like crypto.

If the new Chair supports a rate cut, the crypto market may see a longer-term bullish trend. Former Trump economic advisor Stephen Moore suggests that Trump may appoint a Fed Chair who is "pro-market" to pave the way for the approval of a strategic BTC reserve proposal.

Nasdaq Hits New High, US Stock Funds Flow into Crypto Market

Over the past week, the Nasdaq Composite Index hit a historic high, driven by the strong performance of tech giants like Nvidia. At the close on July 9, the Nasdaq Composite Index stood at 20,611.34 points, up nearly 0.95%, with its total market value surpassing $4 trillion. The stock prices of tech giants like Nvidia continued to rise, demonstrating a significant rebound in investor confidence in risk assets.

The Nasdaq Futures Index is currently still trading at a high level, and the market sentiment continues to show a positive trend. The financial market's recovery is not only reflected in the rebound of tech stocks but also signifies the recovery of other high-risk assets. This confidence surge has provided a favorable opportunity for capital inflow into the crypto market.

In recent years, the correlation between crypto assets and the US stock market has been increasing, especially during periods of risk appetite recovery, making this correlation more prominent. In past cycles, when the risk market warms up, US stock investors often flow into the more volatile crypto market, seeking higher returns.

M2 Growth Reopens the Liquidity Valve

According to the latest data from the Federal Reserve, the US M2 money supply has grown by about 5.2% year-on-year, a significant acceleration from the 3.8% at the end of 2024. This growth is mainly driven by the increase in government bond issuance due to the OBBBA debt ceiling raise and the push of fiscal stimulus measures. The growth of M2, complementary to fiscal expansion, is widely interpreted in the market as a signal of government support for economic growth, further enhancing the attractiveness of risk assets, leading to a significant improvement in current market liquidity.

Federal Reserve officials have recently stated that M2 growth may reach 6% in the third quarter of 2025, further expanding liquidity.

M2 includes cash, demand deposits, and short-term deposits, reflecting the broad money supply in the economy. The growth of M2 will inject generous liquidity overflow effects into the crypto market. Historical data shows that during the substantial M2 growth periods in 2017-2018 and 2020-2021, Bitcoin surged from thousands of dollars to $20,000 and $69,000, respectively.

The growth of M2 could also weaken the purchasing power of the US dollar, prompting emerging markets to increase their holdings of Bitcoin to hedge against inflation risks. Currently, the inflation rate is around 3.5%, and the demand for Bitcoin as a store of value tool is continuously rising, with international companies like Metaplanet announcing plans to increase their Bitcoin holdings as part of their strategic reserves.

However, if the growth of M2 triggers the Federal Reserve to adopt a tightening policy (such as raising interest rates), it may create pressure on the crypto market in the short term, and investors need to closely monitor the Federal Reserve meeting on July 29th to 30th.

Tariff Disputes Resurface, Safe-Haven Funds Drive Bitcoin Surge

Recently, Trump announced plans to impose a 35% tariff on Canada and a 30% tariff on Mexico and the EU. Additionally, there are plans to impose a 25%-50% tariff on more countries starting from August 1st.

The global stock markets reacted relatively mildly to the tariff threat, but Bitcoin saw a significant increase in holdings. The global trade uncertainty caused by tariffs may lead investors to turn to assets like BTC and gold for safe haven.

Looking back at history, Bitcoin also surged from $6,000 to $13,000 in 2018 during the global trade war.

Furthermore, tariffs could raise import costs, weaken the competitiveness of the US dollar, and a devalued dollar could drive up Bitcoin prices. Global capital reallocation also plays a key role, especially as emerging markets, under tariff pressure, may accelerate their Bitcoin holdings to hedge risks.

However, if tariffs lead to a global economic recession, it may temporarily suppress the performance of risk assets. Investors should pay attention to the market's reaction after the tariff policy implementation on August 1.

Conclusion

In conclusion, the changing macroeconomic and policy environment is bringing unprecedented opportunities to the crypto market. From crypto-friendly regulations to Fed policy adjustments, and the positive performance of Nasdaq and M2 money supply, all factors are collectively driving funds into the crypto market.

With the increasing demand for stablecoins and core assets like Ethereum, it can be foreseen that in the coming period, as these macro tailwinds continue to brew, the crypto market will continue to benefit and gradually move towards a more widespread adoption stage.

As technological innovation and regulatory frameworks mature, the role of crypto assets will become increasingly significant, not just as investment tools but also penetrating various fields such as daily financial services, cross-border payments, and corporate finance, truly realizing their broad commercial value and global impact.

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