Relief rally

Macro

Last week's U.S. payroll numbers came in at 57k against a 110k consensus, the weakest print in four months, with April and May both revised lower. Unemployment fell to 4.2%, but only because participation dropped. As a result, the odds of a hike before year-end fell further, down to roughly 25%.

The payrolls miss seemed to feed straight into Warsh's Sintra debut on July 1. The market traded it as dovish, but the actual message was more mixed. He said inflation remains too elevated and reaffirmed the 2% target, the same line from his June debut. As before, he refrained from giving any rate-path guidance, and it was that combination, soft data plus no pushback, that the market chose to read as dovish.

Put together, the story of the past few weeks has been a market increasingly worried about further hikes. Last week's data point, a real slowdown in the U.S. economy, gave the market a reason to expect a more dovish Fed following a hawkish start, and that's what got traded through Warsh's remarks, mixed messaging and all.

As a result, risk assets were broadly up on the week, with crypto bouncing back the hardest. Across the board, risky assets were broadly up, but crypto outperformed the rest by a wide margin. ETH led at +13.54%, with BTC at +6.75%, both well ahead of the S&P (+2.17%) and Nasdaq (+0.86%). Even the laggards stayed in the green: Russell 2k (-0.75%) was the one exception, and Gold added +1.20% on the back of the broader risk-on move. The one number worth flagging against that backdrop is 20Y+ Treasuries, down 1.76%, a steepening move that says the long end isn't fully buying the dovish read past the next CPI print.

Digital Assets

Crypto led the risk-on move by a wide margin, and BTC's strength looks like the cleaner story of the two majors. BTC recovered into the low 60s on real accumulation, whale wallets reportedly added 270k+ BTC at the 200-week moving average, and options flow rotated from downside protection toward 60-70k calls. Price, positioning, and on-chain data all pointed the same direction.

ETH ran hotter, up 13.54% against BTC's 6.75%, but this was largely catalyst driven, and the market seems to be frontrunning again. Ethereum Institutional launched on July 1, backed by Lubin, BitMine, and SharpLink, pitched as the credible front door for banks looking at tokenization and stablecoin rails, following Ethlabs' protocol lab a week earlier. All of this is exciting, and it's the direction much of the community has been asking for, but it's landing on a Foundation that just cut a fifth of its staff and 40% of its budget, plus roughly $345m in ETH ETF outflows the prior week.

Stablecoins were the bigger structural story regardless of the majors' price action. Open USD launched with a 140-company consortium behind it, including Visa, Mastercard, Stripe, and Coinbase, targeting reserve-float economics directly, the part of the stablecoin business incumbents depend on most. Circle dropped 15-17% on the news.

Lighter and a handful of other protocols ripped on the back of Robinhood's July 1 keynote, where Tenev and Kerbrat unveiled Robinhood Wallet's integration of Lighter's perpetual futures. LIT surged over 20% on the announcement alone, a clean example of a distribution catalyst doing the work rather than broad market beta.

Away from that pocket, the rest of altcoins looked comparatively selective and weaker. Indicative quotes coming through the desk skewed toward profit-taking rather than fresh positioning, consistent with confidence in a broader alt run still being low here.

Our take:

“A relief rally"

This looks like a textbook relief rally, and it makes sense given the inputs. Easing macro, a Fed leaning slightly more dovish even through mixed messaging, real de-escalation in the Middle East, and genuinely promising institutional headlines around Ethereum are all landing on an asset class trading on thin summer liquidity that was bombed out completely through 1H26. That combination is enough to explain the bounce without needing a bigger story behind it.

There's room for this to grind a bit higher from here, and the ETF picture gave the first real reason to think so. The persistent BTC ETF outflow trend did break on July 2, a $221.7m single-day inflow that ended a 10-day, $2.73bn outflow streak, and it's a genuine data point worth acknowledging. But one session doesn't make a trend. YTD outflows still sit at $5.4bn, and BlackRock's IBIT alone was still bleeding on an 11th straight day even as the headline flow turned positive. We'd want to see that inflow sustained over consecutive sessions before reading it as the start of a real reversal rather than a one-off squeeze-adjacent print.

Until that broader capital flow picture actually turns, this reads as relief rather than something structural. The structural weaknesses we've flagged for weeks around ETF and capital flow into the space haven't meaningfully changed on the back of one print leaving us still somewhat cautious.