The macro Fluctuation intensifies as BTC firmly breaks through 100,000, focusing on defense and the support level.

Macroeconomic fluctuations intensify market turbulence, and the enthusiasm for funds cannot hide structural risks

• Macroeconomic Environment Warming: Credit rating downgrades, tariff and tax reduction policies have caused market fluctuations, leading to an increase in risk aversion sentiment, and gold has surged.
• Positive capital outlook: Strong inflow of stablecoins and ETF funds, with new buying momentum; however, market risk aversion is rising, and sustainability still needs to be observed.
• Price Divergence from Fundamentals: BTC rises, with funds, off-exchange premiums, and ETFs heating up simultaneously, increasing the risk of a pullback.
• Investment Strategy Advice: Focus on defense, pay attention to the BTC support level at $103,000 and related indicator changes, and monitor the ETH/BTC and SOL/BTC price ratio trends.

1. Macroeconomic and Market Environment

Credit rating downgrades, tariff and tax reduction policies have pushed up US bond yields, triggering fluctuations in the stock and cryptocurrency markets.

US stocks may face adjustments, with the technology sector under pressure while the financial and defense sectors are relatively resilient; cryptocurrencies may drop towards support levels, and attention should be paid to central bank monetary policy signals.

Fiscal stimulus and interest rate cuts are beneficial for the stock market and cryptocurrencies, but one must be wary of the expanding fiscal deficit and risks to the dollar's position.

If monetary policy shifts to easing and the dominance of the dollar remains solid, the market will continue to rise; otherwise, it will be necessary to increase the allocation of non-dollar assets.

Strategy: Increase holdings in mainstream cryptocurrencies and dynamically adjust global asset allocation.

2. Analysis of Capital Flow and Main Cryptocurrency Market Structure

External Capital Flow

• ETF Funds: This week, the net inflow was $2.8 billion, significantly increasing the inflow scale.
• Stablecoins: This week, an issuance of 2.3 billion USD was made, with an average daily issuance of 321 million USD, which is at a relatively high level.

Market Sentiment Indicator

• OTC Premium: The premium of stablecoins continues to rise.

Bitcoin (BTC)

• Technical Analysis: The market is in a fluctuation upward range.
• On-chain chip distribution: Chips over $103,000 strengthened

Ethereum (ETH)

The trend is weaker than BTC, the ETH/BTC ratio remains volatile, with funds continuously flowing back primarily to BTC.

On-chain fluctuations: The number of active addresses is rising, which may indicate that a phase of bottoming out is complete.

Macroeconomic Review

Impact of Credit Rating Downgrade on the Market

Background:

On May 16, 2025, a rating agency downgraded the United States' credit rating from the highest level by one notch, citing the surge in debt scale (36 trillion USD, accounting for 122% of GDP) and high interest expenses (accounting for 3% of GDP). This marks the third time the U.S. has lost its highest rating from the three major rating agencies, following downgrades in 2011 and 2023. The downgrade, combined with tariffs and tax cuts (expected to increase the deficit by 3.3 trillion USD), will exacerbate fluctuations in the U.S. Treasury market in the short term.

Historical Review:

• 2011: Risk aversion boosted demand for U.S. Treasuries, with the 10-year yield falling to 1.7%.
• 2023: Increased bond issuance leads to selling pressure, with yields rising to 4.9%, followed by fluctuations.
• 2025: Similar to 2023, downgrades and policy uncertainty drive up yields (30-year has surpassed 5%), with ongoing short-term selling pressure.

Supply Side:

• Low maturity pressure: The peak of US Treasury maturity from May to June mostly consists of short-term Treasury bills (accounting for 80%), with a 4% yield attracting buyers, and the extension risk is small.
• Debt issuance pressure is high: New policies will expand debt issuance, increase supply, and yields may rise further.

Demand Side:

• Short-term: The central bank's interest rate cut (saving about $90 billion in interest for every 25 basis points) and halting the balance sheet reduction can boost demand and lower yields.
• Long-term: Demand for US Treasuries relies on US dollar hegemony, and it is necessary to maintain the international status of the dollar to ensure rigid buying.

Impact on Stock Market and Cryptocurrency

Short-term impact (until July 2025)

1. Stock Market

• Market Fluctuation Intensifies: The downgrade of credit ratings exacerbates market concerns about fiscal sustainability, combined with uncertainties surrounding tariff policies and tax reduction bills, which may trigger a rise in risk-averse sentiment. The increase in the debt ceiling has led to a rise in the supply of U.S. Treasuries, pushing up yields (30-year yields have exceeded 5%), thereby raising corporate financing costs.
• Sector differentiation:

Pressure on sectors: Technology stocks and high-valuation growth stocks are sensitive to interest rates, and rising yields will compress valuations (such as well-known technology stocks with high price-to-earnings ratios). Consumer goods and retail may come under pressure due to tariffs raising costs.

Beneficiary sectors: The financial sector (such as banks and insurance companies) benefits from a high interest rate environment, while the defense and energy sectors may perform strongly due to increased spending from new policies.

• Monetary policy signals: If the central bank releases signals of interest rate cuts or halting balance sheet reduction in July, it may alleviate market pressure and boost the stock market, especially small and mid-cap stocks.

Strategy:

• Reduce holdings in overvalued tech stocks and focus on the financial, defense, and energy sectors.
• Pay close attention to monetary policy signals and prepare to seize rebound opportunities under the expectation of interest rate cuts.
• Allocate defensive assets (such as consumer staples ETFs or gold) to hedge against Fluctuation.

2. Cryptocurrency

• Interest Rate Pressure: The rise in U.S. Treasury yields reduces the attractiveness of non-yielding assets (such as cryptocurrencies), and funds may flow into high-yield Treasury bills (4% yield).
• Potential benefits: If the central bank hints at a rate cut in July, the crypto market may rebound in advance, as easing expectations favor risk assets. Decentralized Finance (DeFi) projects may attract some funds due to risk-averse demand.

Strategy:

• If the central bank signals easing, consider increasing holdings in mainstream cryptocurrencies (such as BTC, ETH) or DeFi tokens.

Long-term Impact (After 2025)

1. Stock Market

• Fiscal policy driven: The new policy's $3.8 trillion tax cut and $200 billion defense/border spending will stimulate economic growth, benefiting the overall performance of the stock market. If tariff revenues (expected to be $2.7 trillion) effectively offset the deficit, concerns about fiscal deterioration will ease, supporting the continuation of the bull market.
• Interest rates and valuations: A central bank rate cut (saving $90 billion in interest expenses for every 25 basis points) can reduce corporate financing costs and boost high-growth sectors (such as technology and clean energy). However, if the deficit continues to widen and the central bank maintains high interest rates, valuation pressures will limit the upside potential.
• Impact of Dollar Hegemony: The long-term performance of the stock market relies on the international status of the dollar. If dollar hegemony is solid (through current account output and financial account recovery), foreign capital inflow will support the stock market; if the position of the dollar wavers, capital outflow may drag down the market.

2. Cryptocurrency

• Loose policy benefits: If the central bank continues to cut interest rates and stops tapering, increased liquidity will drive up cryptocurrency prices, similar to the bull market of 2020-2021 (Bitcoin rose from 10,000 to 69,000 USD). In the long term, Bitcoin could break through 150,000 USD.
• Regulation and Adoption: The new government's friendly attitude towards crypto (such as supporting Bitcoin reserves) may promote institutional adoption, benefiting the market. However, if fiscal deterioration leads to a trust crisis in the dollar, cryptocurrencies may attract capital inflows as a safe-haven asset.
• Risk Factors: If the central bank delays interest rate cuts or the dominance of the US dollar is challenged, the cryptocurrency market may experience increased Fluctuation due to a decline in risk appetite.

Strategy:

• Hold mainstream cryptocurrencies (such as BTC, ETH) for the long term, and pay attention to on-chain data (such as active addresses, transaction volume) to assess trends.
• Diversify investments in potential projects (such as Layer 2 solutions, Web3) to avoid single asset risk.
• If the status of the US dollar shakes, increase BTC allocation as a hedge.

Key Events and Data to Focus on Next Week

• May 29 Memorial Day in the United States
• May 30th Eurozone May Economic Sentiment Index
• May 31 China May Manufacturing PMI
• June 1st, US May ISM Manufacturing PMI
• June 2nd, U.S. May Non-Farm Payroll Report

2. On-chain Data Analysis

1. Changes in short- to medium-term market data affecting the market this week

1.1 Stablecoin Fund Flow Situation

This week (from May 16 to May 26), the total amount of stablecoins slightly increased to 213.596 billion, with an issuance of 2.34 billion, showing a significant rebound compared to the previous period. The rebound period mainly comes from the second half of this week. In relation to the total stablecoin amount (213.596 billion), 2.34 billion accounts for approximately 1.1% of the increase, which is a relatively significant rebound. For low market cap cryptocurrencies, this is a positive marginal change. The increase in issuance means that more "buying power prepared to enter the crypto market" is being created.

1.2 ETF Fund Flow Situation

This week, there was a significant inflow into BTC ETFs, with an inflow of 2.8 billion USD, which is a strong signal of funds indicating that institutional investors are becoming bullish on BTC again. Although this week was slightly lower than the 33,462 coins from the week of April 21, it was significantly higher than the previous weeks (especially last week's 5,849 coins), indicating substantial buying, and the price trend is well-aligned with the funds.

1.3 Off-exchange Premium and Discount

This week, the OTC premium for both USDT and USDC has slightly rebounded, returning to the 100% level, indicating a renewed demand for stablecoins in the market. Combined with stablecoin data, not only does the on-chain data show optimistic performance, but the trend of inflows from OTC funds has also slightly warmed.

1.4 Institutional Purchases

Since the start of this round of increase (on April 14), a certain institution has purchased 48,045 BTC, spending about $4.5469 billion in total. By combining the stablecoin data and ETF data mentioned above, we can see that these purchases by institutions have also become an important channel for the capital driving this round of increase. Moreover, the frequency of purchases since the relative high point last year has significantly increased compared to 2023-2024. Currently, the institution's cost has risen to $69,726, close to the low point in April. From an analytical perspective, these institutions have become an important force affecting the market, and it is necessary to strengthen the monitoring of related data in the future.

1.5 Exchange Balance

In the latter half of this round of price increases, when the price was at 95000, the market saw both BTC and ETH continuously being withdrawn from exchanges, indicating that investors were unwilling to sell. Especially with ETH, after a short squeeze up to 2500, there was a rapid outflow of funds from exchanges, releasing a strong "lock-up intention", showing that investors were regaining confidence, which is actually an important force supporting the latter half of this round of increase. However, it should be noted that currently, the rate of decrease in balances has slowed down, so we need to closely monitor whether the liquidity of exchanges will continue to be squeezed.

2. Changes in Mid-term Market Data Affecting the Market This Week

**2.1 Holding Address Holding Ratio and