BTC hits a new all-time high, the market awaits interest rate cuts and further rise

The performance of risk assets in the market has been strong, surprising many Wall Street hedge funds and prompting investors to reflect on whether they missed certain key signals.

After the rebound in April, the three major U.S. stock indices continue to rise strongly, and BTC has also reached a new historical high.

Despite the easing of trade disputes, no substantial breakthroughs have been made in reaching an agreement. Geopolitical conflicts persist, with negotiations and military actions intertwined.

However, a large amount of funds has flowed in, and the Bitcoin spot ETF has attracted over $2.7 billion in inflows. Long-term holders' positions are close to their highs, and exchange holdings continue to decline, with the supply and demand situation for Bitcoin being very strong.

At the policy level, the state-level Bitcoin reserve bill in the United States has made historic breakthroughs. Legislation related to stablecoins has also passed the Senate vote.

The U.S. employment data performed strongly, inflation continues to decline, and GDP expectations have begun to be revised upward. This may be the fundamental reason for the market's strength. However, trade disputes have not been completely resolved, and concerns stemming from debt issues remain. The stock market and Bitcoin have already reflected the most optimistic expectations this month. The market may oscillate to eliminate uncertainty while waiting for the interest rate cuts in the third quarter.

Macroeconomics: Trade friction effects are triggering a "mild recession" in the US economy.

The analysis in April pointed out that "the most difficult times are over, and once policymakers return to rational decision-making, the market should be able to return to its own operating rules." It has been proven that the global geopolitical game and the strength of the American democratic system ultimately brought market expectations back to rationality, leading to a continuous rebound and resulting in the most optimistic pricing.

The continuous occurrence of the "stock, bond, and currency" triple kill has triggered a severe shock in the US financial market. Coupled with strong opposition from the business community, trade policies have begun to shift, quickly entering the second phase of "negotiation" and starting the third phase, having first reached a tariff agreement with the UK.

In early May, major economies held the first round of trade negotiations in Switzerland, putting a pause on the intense tariff war that had lasted for more than a month. Both sides issued a joint statement on the 12th, committing to mutually reduce the previously imposed high tariffs over the next 90 days and stated that they would continue to negotiate on economic and trade relations. On that day, the S&P 500 index surged by 3.26%.

In early April, as trade policies softened, the US stock market launched a major counterattack, basically recovering the losses since the trade war began. In May, with formal negotiation talks resuming, the previously stagnant US stock market received another boost and continued to rise. As of the 31st, the Nasdaq, S&P 500, and Dow Jones indices recorded monthly rises of 9.56%, 6.15%, and 3.94%, respectively.

The rebound of the US stock market in April can be seen as a reflection of the end of panic selling and the softening of policies, quickly pricing in the completion of the first phase of trade friction. The rise in May indicates an optimistic pricing for the second phase (negotiations). Based on the current public information, this pricing is sufficient and optimistic. Before gaining new progress in trade negotiations, interest rate cuts, and further developments in the geopolitical situation, continuing to price significantly upwards may lack prudence.

The pricing for May has already incorporated the relatively "strong" performance of the U.S. economy and employment fundamentals.

The economic data released at the end of May showed that the US economy contracted by 0.2% on an annualized basis in the first quarter. This figure is a slight adjustment from the previously announced initial value (a contraction of 0.3%), but it still indicates that the US economy suffered some damage at the beginning of the year due to the drag from consumer spending and imports.

After experiencing undervaluation in the past few months, GDP soft data has recorded a rebound. The GDP Now data released by a certain Federal Reserve Bank shows that since the end of April, the data has returned above the zero axis, reaching 3.8% by the end of May, reflecting an optimistic sentiment following the easing of trade frictions.

The PCE data released in May shows that inflation continues to ease, with the PCE annual rate falling for three consecutive months to a low of 2.15%, and core PCE dropping to 2.52%, the lowest since the pandemic, gradually approaching the 2% target expected by the central bank for interest rate cuts.

The employment data exceeded market expectations. Announced in early May, the non-farm payrolls for April 2024 added 177,000 jobs, higher than the market expectation of 138,000 jobs. As of the week ending May 24, the number of initial claims for unemployment benefits was 240,000, an increase of 14,000 from the previous week (revised to 226,000), surpassing the market expectation of 230,000. The strong performance of employment data has, on one hand, dispelled market concerns about a recession in the U.S. economy, and on the other hand, has also allowed the central bank to focus on its "inflation reduction" goal.

This month's interest rate meeting decided to maintain the interest rate unchanged for three consecutive months. Although certain "dovish" remarks were made during the "three kills of stocks, bonds, and currencies" period, after the financial market stabilized, they continued to hold their ground under immense pressure, emphasizing that uncertainties caused by trade frictions may lead to a rebound in inflation data.

The strong performance of the financial markets, coupled with the ongoing trade frictions and the potential rebound in inflation, has led the market to judge that the central bank is unlikely to restart interest rate cuts in the first half of the year. Recent data indicates that traders expect only two rate cuts this year, in September and December, each by 25 basis points. This expectation has, in fact, "constrained" the space for significant rises in U.S. stocks and crypto assets driven by liquidity.

Based on the current data and situation, it is expected that US stocks and BTC will likely maintain fluctuations in the next two months, until the interest rate cut expectations in August may drive US stocks and BTC to reach new historical highs. This judgment includes an optimistic resolution of trade frictions and a relatively "mild" recession in the US economy.

The US GDP recorded a decline of -0.21% in the first quarter, and the decline in consumer confidence and market turmoil caused by trade friction in the second quarter could lead to a slight drop in GDP, reaching the standard of a "mild recession". Therefore, starting interest rate cuts in September may be a more cautious expectation.

Crypto Assets: Strong Capital Inflow Drives Bitcoin to Refresh Historical Highs

In May, Bitcoin opened at 94182.55 USD and closed at 104645.87 USD, rising by 10463.33 USD for the month, with a growth rate of 11.11%, a volatility of 19.79%, and a trading volume that has declined for two consecutive months.

From a technical indicator perspective, after Bitcoin's price returned to the "Trump bottom" (90,000-110,000 USD) in April, it set a new historical high of 112,000 USD and surged above the "first bullish uptrend line."

In a high interest rate environment, retail investors have not formed a true decisive buying power. In fact, since March of last year, the daily new addresses for Bitcoin have already dropped to a low level.

In the rebound since April, the decisive force comes from institutions.

According to the announcement data of a certain company, it has increased its holdings by 133850 BTC since 2025, bringing the total holdings to 580250 BTC.

Since January 2024, 11 Bitcoin spot ETFs have been approved. In May 2024, the U.S. House of Representatives passed the "Financial Innovation and Technology Act", gradually establishing crypto assets and blockchain technology as key development areas. Subsequently, crypto assets represented by Bitcoin have further mainstreamed in the U.S.

In March 2025, the U.S. government signed an executive order to establish a "Strategic Bitcoin Reserve," using approximately 200,000 BTC held by the government as national reserve assets.

After that, more than 20 states in the United States began proposing state-level Bitcoin reserve bills. This demand also made a breakthrough in May. On May 7, a certain state's governor signed a bill, becoming the first state in the country to officially include cryptocurrencies in its strategic reserves. The bill allows the state treasurer to invest up to 5% of state government funds in cryptocurrencies. Other states' related Bitcoin reserve bills have also been voted on by the Senate and are awaiting the governor's signature to take effect.

In the blockchain and Web3 space, on May 19, a bill to regulate the development of stablecoins was passed in the Senate with a procedural vote of 66 in favor and 32 against, paving the way for the final signing of the bill. In the same month, a regional legislative council officially passed a draft ordinance on the 21st to establish a licensing system for fiat stablecoin issuers.

Several large banks are exploring cooperation to launch a joint stablecoin. Currently, several well-known banks are involved.

The issuance scale of stablecoins exceeding 240 billion USD will thus enter the era of compliant development. Beyond Bitcoin, stablecoins are likely to become the second widely adopted crypto asset and are also likely to become the first killer app in the Web3 space to break 1 billion users. This lays the foundation for the robust development of blockchain, especially smart contract platforms.

After being integrated into the compliance system, Bitcoin and blockchain are becoming the technological high ground that must be occupied. The investment and speculation sentiment triggered by this trend is spreading. Following a certain company, multiple companies around the world are launching plans to hoard Bitcoin and other crypto assets (such as Ethereum and Solana).

The expansion of use cases, along with the FOMO emotions and purchasing power triggered by regulatory breakthroughs, has become the fundamental driving force behind the rise in the prices of Bitcoin and other crypto assets.

Funds: Optimistic Pricing + Aggressive Expansion

In the process of the stock market crash in March and April, the inflow of Bitcoin spot ETF came to an abrupt halt, causing Bitcoin to adjust by over 30% along with the stock market (the largest pullback in this cycle). However, since April and May, accompanied by a strong rebound in the stock market, the buying power of Bitcoin spot ETF has also strongly recovered, with inflows of 605 million and 2.775 billion USD, respectively, driving Bitcoin to recover all its losses and setting a new historical high of 112,000 USD.

Regarding stablecoins (not all used for cryptocurrency trading), there has also been an expansion, with inflows of 5.375 and 5.567 billion dollars in April and May respectively, but compared to the fluctuations in Bitcoin spot ETF channel funds, the changes are relatively small.

It was previously pointed out that the pricing power of Bitcoin has been transferred from on-site funds to spot ETF channel funds and similar institutions. These institutions exhibit a long-term subjective bullish attribute, and the underlying reason is that Bitcoin and crypto assets are continuously making breakthrough progress at the policy level. This is not only the reason why Bitcoin was able to rebound rapidly in April and May and surpass the Nasdaq to create a historical high first, but also the fundamental logic support that can be optimistic about the market in the long term.

However, it should be noted that the stock market has currently priced in an extremely optimistic scenario regarding trade frictions, and it may imply that there will not be a significant economic recession. Currently, US stocks find it difficult to break new highs, and fluctuations are inevitable. Although some institutions are continuously inflowing, the Bitcoin spot ETF finds it hard to distinguish itself from the Nasdaq's independent market trend, so it is overly optimistic to expect Bitcoin to reach new highs in the short to medium term.

Chip Structure: The stock of Bitcoin on exchanges continues to decline

During the decline in March-April, long-term Bitcoin investors resumed accumulation, objectively acting as a stabilizer to reduce market selling pressure.

By the end of May, the long positions reached a scale of 14.4199 million coins, close to a historical high, while the stock scale of centralized exchanges has been continuously declining, currently remaining at only 2.9882 million coins, close to the level at the end of November 2020.

In the previous cycle, when liquidity surged, long positions objectively restrained the price rise through selling. However, during price decreases in the cycle, long positions would slow down selling or even turn to increasing their holdings; this cycle is no exception.

The difference from previous cycles is that in the past, the "secondary sell-off" by long-term holders would end the bull market, while after this round of "secondary sell-off," the market chose to continue rising. We interpret this as the introduction of new types of institutions into the long-term holder structure, which has caused a change in market trends. Whether this change is permanent or temporary needs close attention.

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