Augustine Fan: Ethereum Leads the Market; Exercise Caution When Chasing Highs to Avoid Fruitless Volatility

Augustine Fan

Augustine Fan is a professional with over twenty years of distinguished experience, active in Wall Street, family offices, and private equity, and is currently engaged in the cryptocurrency field. He is currently in a leadership role at SOFA.org and also serves as a partner and Chief Financial Officer (CFO) at SignalPlus, a leading software technology provider in the cryptocurrency options space.

Before entering the cryptocurrency sector, Augustine worked at Goldman Sachs for ten years as a U.S. interest rate trader and macro expert, serving in offices in New York, London, Tokyo, and Hong Kong. After leaving Wall Street, he joined a family office based in Hong Kong that focuses on shipping, assisting in the management of one of the most active macro trading portfolios in Asia. He then became the Chief Investment Officer (CIO) of another family office located in Hong Kong, focusing on private equity, credit, real estate, publicly traded companies, and frontier market investments.

Augustine is a CFA charterholder, a Leslie Wong Fellow, and graduated with first-class honors from the University of British Columbia (UBC) in Canada, obtaining a Bachelor of Commerce degree.

Market Overview

This week, there were not many new developments to report, as the S&P 500 index recovered from the shock of the non-farm payroll data, approaching historical highs again. On the other hand, the Nasdaq index benefited from strong earnings reports, setting a new record, ignoring the ongoing political turmoil of the Trump administration and new tariff issues.

Global risk assets also performed well, with European and Japanese stock markets rising due to ongoing trade resolutions, while the United States made concessions on tariff stacking and auto tax reductions.

On the other hand, this week, the U.S.-China trade ceasefire agreement is set to expire, with some market participants expecting the deadline to be extended again, but others are concerned that the U.S. may impose new tariffs due to China purchasing Russian oil—India has already been sanctioned for similar actions.

The good news is that the U.S. and Russia plan to draft a new peace agreement for Ukraine before this week’s Alaska summit, providing another tailwind for risk assets and pushing oil prices lower as the war premium continues to diminish.

U.S. capital flows remain strong, with domestic and international investors making a significant return. The latest data shows that net buying reached a new monthly inflow record, and trading volume also hit a new high, providing positive corroboration.

Trading Volume Surge

In 2025, U.S. stock market trading volume reached a historic high, significantly surpassing previous years, mainly due to a strong return of retail trading from the beginning of the year. According to Citigroup data, the average daily trading volume in the first half of 2025 was nearly 50% higher than the average level of the previous five years, marking a remarkable increase of 40% over the previous record set in 2024. This trend continued into July, with the average daily trading volume reaching 18 billion shares.

In fact, 2025 has been so impressive that 17 of the 20 largest single-day trading volumes in history occurred in 2025, with 13 days occurring in the second quarter alone. Absolutely unbelievable.

Year-to-date, retail participation has driven extremely high concentration in individual stocks, with the trading volume of the top five stocks exceeding 20% of the total market trading volume on certain trading days in 2025. Retail investors’ activities in call options have also rebounded significantly, reaching the highest level since the COVID-19 pandemic.

In terms of earnings, approximately 80% of S&P 500 companies that have reported results exceeded expectations, with a year-on-year growth of 12% and a surprise magnitude of 9%, led by the technology and financial sectors. Against the backdrop of lowered expectations following tariff concerns, earnings per share in the second quarter of 2025 significantly surpassed expectations.

Market Sentiment

The current rebound has pushed the stock and credit markets’ probability expectations of an economic recession back to single-digit low levels. The U.S. fixed income market, as usual, is an exception, still pricing in the most aggressive expectations for further easing from the Federal Reserve.

Regarding inflation, although the Federal Reserve has indicated a willingness to overlook recent price pressures, the ISM (Institute for Supply Management) sub-index data indicates a concerning rebound in payment prices, which typically leads CPI by about a quarter, potentially complicating the Fed’s rate cut plans later this year. However, for now, the market is willing to maintain high levels until hard data proves otherwise, under the influence of risk appetite.

Cryptocurrency Market

The cryptocurrency market also experienced a similar rebound this week, primarily driven by headlines regarding Trump’s directive for regulators to “study” the possibility of including cryptocurrencies (and private equity) in 401(k) investment portfolios. If this initiative comes to fruition, it would obviously open up significant purchasing demand. However, there is still a long way to go before it could become law.

More excitingly, Ethereum led the surge this week, posting a weekly increase of +20%. The latest mainstream experts and followers are touting ETH as the latest FOMO (fear of missing out) target in the public equity space. Retail traders responded actively, pushing BNMR up nearly 60% this week, demonstrating how to correctly engage in FOMO in a regulated world to “native gamblers.”

As expected, Ethereum ETFs saw approximately $700 million in new inflows over the last two days of the week, driving cumulative inflows to a new historical high, with total assets under management doubling to nearly $10 billion year-to-date (compared to $3 billion at the beginning of the year).

ETH’s recent rebound has also led to a divergence in short-term volatility; Bitcoin’s implied volatility remains hovering near historical lows, while ETH’s volatility has surged significantly. ETH’s term structure is currently in a backwardation state, with long-term volatility expected to fall to the ~70% range, while BTC’s IV curve is the opposite, with short-term volatility severely compressed, and the spot market hovering around $120,000.

For comparison, a month ago, the market priced in only a 5% probability of ETH reaching $4,500 in August, while the actual trajectory of the spot market far exceeded the implied path, catching many participants off guard.

Looking Ahead

Looking ahead, at the current juncture, we believe there is no strong necessity to chase the market high, as we anticipate that market assets will exhibit two-way volatility in the coming month. Be cautious of potential downward catalysts, such as a significant reversal in the dollar index or an unexpected rise in inflation. Traders, please stay vigilant, and wish you successful trading!

Risk Warning

Investment in cryptocurrencies is highly risky, and their prices can fluctuate drastically, leading to the potential loss of your entire principal. Please assess the risks carefully.