Orange Evening Interpretation 8.7

The market rebounded, and expectations for interest rate cuts continue to strengthen. Last night, Goldman Sachs' macro team directly stated that a 50 basis point rate cut in September has become the baseline scenario, and the current market still underestimates this possibility. Last night, three Federal Reserve officials also began to anticipate a rate cut in September. These were the same officials who clearly supported maintaining the status quo at the last FOMC meeting, but it seems that this time the non-farm payrolls have completely shifted the Fed's stance.

I estimate that Bowman and Waller will soon publicly support a 50 basis point rate cut. Currently, the CME's expectation of a 25 basis point cut in September has risen to over 93% compared to the day before, which means that a 25 basis point cut is basically fully priced in. If there is a 50 basis point cut, the rate cut bull market may start ahead of schedule. Additionally, last night there was news that Trump is going to appoint a new Federal Reserve Chairman sooner, and four candidates have already been narrowed down, with the top two being Kevin Warsh at a 30% probability and Hassett at 26%. The other two are Malpass and Waller, with Hassett and Malpass being relatively more dovish. If either of these two becomes the new Federal Reserve governor, it would be a huge boon for the market, and this is likely to happen in the next couple of days.

Last night, Trump confirmed that a 100% tariff will be imposed on chips and semiconductors, but if there is a commitment to only manufacture in the United States, the tariff will be exempted. Chip-related stocks like Apple and TSMC surged due to the announcement of speculative factory construction in the U.S.; additionally, other tariff negotiations are ongoing, with a 25% tariff increase on India, but Apple products in India are unaffected; the U.S.-Japan trade agreement continues to face discrepancies, with plans to add a 15% tariff on top of the existing tariffs; Switzerland failed in negotiations for a 39% tariff; South Korea and the EU are also continuing negotiations with the U.S. to finalize details. Now, Trump is much like a mobster—if you're willing to pay a protection fee, you can get a tax reduction. Moreover, the deadline for Trump's negotiations with Russia and Ukraine is approaching in the next couple of days. It is said that there may be a turning point, possibly delaying the timeline, with Trump stating that he will meet with Putin as early as next week, and then see Zelensky.

Speaking of the market, last night the ETF funds for Bitcoin and Ethereum returned to a net inflow status. Although not much, Bitcoin saw an inflow of 90 million and Ethereum 30 million, but the impact on market sentiment is still significant. Then the treasury company continues to be bullish, and Saylor responded to a question by stating that buying Bitcoin is the best investment advice received to date. Tom Lee, the founder of BMNR, stated that buying ETH now is like buying Bitcoin in 2017, and some will regret not placing their bets at this moment. According to the 2021 ETH/BTC peak exchange rate, ETH should currently be 16,000 USD. Placeholder partners continue to be bullish on the ETH/BTC exchange rate rise. Standard Chartered believes that Ethereum treasury companies are now very worthwhile investments, superior to U.S. spot Ethereum ETFs, because Ethereum treasury companies can provide better opportunities for Ethereum price appreciation, staking returns, and per-share ETH growth than U.S. spot ETH ETFs, which currently cannot participate in staking or DeFi. Based on this, there will be a wave of strong FOMO when staking ETFs pass through.

Today, Ethereum continues to hold steady at 3700, Solana breaks through 170, and most altcoins are in a general upward trend, with DEIF showing the strongest performance. Projects like $ena, $fluid, and $pendle, as well as $dydx, are all at the top of the gainers list. There are already clear signs of a DeFi summer in the market. Currently, ETH has a basic staking annualized yield of 3%, but derivatives can generally yield around 10%. Asset management and institutions are looking for higher APYs, reminiscent of when YFI launched in 2021. Additionally, the yields on stablecoins are quite impressive, with the stablecoin pool in collaboration between ena and Aave offering 12% annualized returns. I've been closely observing the TVL data over the past few days, and it has been rising almost daily. It seems that players are transitioning from on-chain PvP to staking, re-staking, fixed income, and mining. If this narrative continues to evolve and new innovations emerge, the DeFi summer may indeed return. Therefore, the strategy of betting on public chains and leading DeFi infrastructure in this round is undoubtedly correct.