BTC reaches a new historical high, the market awaits interest rate cuts and new levels

In May, the price of Bitcoin reached a new historical high, and the U.S. stock market continued to rise strongly. Despite the ongoing uncertainties in the international situation, a large influx of capital has entered the cryptocurrency market, with Bitcoin spot ETFs attracting over $2.7 billion. Long-term holders are nearing high positions, while the stock of Bitcoin on exchanges continues to decline, indicating a strong supply-demand relationship.

In terms of policy, several state-level Bitcoin reserve bills have made breakthrough progress in the United States. Meanwhile, stablecoin-related bills have also been passed in the Senate. The U.S. employment data has shown strong performance, inflation continues to decline, and GDP expectations have begun to be revised upward. These factors may be the fundamental reasons driving the market's strength.

However, the international trade disputes have not been fully resolved, and the concerns arising from the U.S. debt issue remain. Currently, the stock market and Bitcoin's trends have already reflected the most optimistic expectations, and in the future, they may digest uncertainty through fluctuations while waiting for potential interest rate cuts in the third quarter.

Macroeconomics: The US economy may experience a "mild recession"

The report in April pointed out that "the most difficult times are behind us, and once policymakers return to rational decision-making, the market is expected to return to a normal trajectory." It has been proven that with the evolution of global geopolitical situations and the operation of the American democratic system, market expectations will eventually return to rationality, ushering in a sustained rebound and achieving the most optimistic pricing.

After experiencing the triple blow of "stocks, bonds, and currency", the US financial market has been shaken dramatically. Coupled with strong opposition from the business community, trade policies have begun to adjust and quickly entered the negotiation phase. In early May, the two major powers held the first round of trade talks in Switzerland, hitting the pause button on the intense trade dispute that had lasted for more than a month. On May 12, both sides issued a joint statement, committing to mutually reduce the high tariffs imposed previously within the next 90 days, and expressed their intention to continue negotiating on economic and trade relations. On that day, the S&P 500 index surged by 3.26%.

In early April, with the easing of trade policies, the US stock market launched a major rebound, almost recovering the losses since the trade dispute began. In May, with the start of formal negotiations, the previously stagnant US stock market gained momentum again and continued to rise. As of the 31st, the Nasdaq, S&P 500, and Dow Jones indices recorded monthly gains of 9.56%, 6.15%, and 3.94%, respectively.

The rebound in the stock market in April can be seen as a reflection of the end of panic selling and a softening of policies, quickly pricing in the completion of the first phase of the trade dispute. The increase in May reflects the market's optimistic expectations for the second phase of trade negotiations. Based on the current publicly available information, this pricing is already quite sufficient and optimistic. Before there is new progress in trade negotiations, interest rate cuts from the Federal Reserve, and further easing of geopolitical tensions, continuing to significantly raise valuations may lack caution.

The market pricing in May has already incorporated the relatively "strong" performance of the U.S. economy and labor market.

Economic data released at the end of the month showed that the U.S. economy contracted at an annual rate of 0.2% in the first quarter. This figure is a slight upward adjustment from the previously announced initial value (a contraction of 0.3%), but it still indicates that the U.S. economy suffered some degree of damage at the beginning of the year due to weakened consumer spending and imports.

After being undervalued for the past few months, the GDP soft data has rebounded. 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 the optimism following the easing of trade disputes.

The PCE data, which the Federal Reserve has been focusing on since May, shows that inflation continues to slow down, 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 that the Federal Reserve expects for interest rate cuts.

The employment data exceeded market expectations. Data released in early May showed that non-farm payrolls increased by 177,000 in April 2024, higher than the market expectation of 138,000. As of the week ending May 24, 2025, the number of initial jobless claims was 240,000, an increase of 14,000 from the previous week (revised to 226,000), and higher than the market expectation of 230,000. The strong performance of the employment data has alleviated market concerns about a recession in the U.S. economy, while also allowing the Federal Reserve to focus on its "inflation reduction" goals.

This month, the Federal Reserve decided to keep interest rates unchanged for three consecutive months. Although the Fed had released some "dovish" statements during the turmoil in the financial markets, after the markets stabilized, the Fed withstood the pressure and remained inactive, emphasizing that the uncertainty caused by trade disputes could lead to a rebound in inflation data.

The strong performance of the financial markets, combined with the ongoing trade disputes and the possibility of inflation rebounding, leads the market to judge that the Federal Reserve is unlikely to restart rate cuts in the first half of the year. According to certain data, traders expect the U.S. to cut rates only twice this year, in September and December, each by 25 basis points. This expectation actually limits the space for liquidity to drive significant increases in U.S. stocks and crypto assets.

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

The GDP of the United States recorded a decline of -0.21% in the first quarter, and the drop in consumer confidence and market chaos caused by the trade dispute in the second quarter could lead to a slight decline in the second quarter 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 Inflows Drive Bitcoin to New Highs

In May, the opening price of Bitcoin was $94182.55, the closing price was $104645.87, with an increase of $10463.33 for the month, a growth rate of 11.11%, a volatility of 19.79%, and trading volume decreased for two consecutive months.

From a technical indicator perspective, after Bitcoin's price returned to "a certain level" ($90,000~$110,000) in April, it reached a historical high of $112,000 and broke through the "first bullish ascending trend 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 fallen to a low.

In the rebound since April, the decisive force comes from institutional investors.

According to a certain company's announcement data, it has increased its holdings by 133,850 BTC since 2025, bringing the total holdings to 580,250 BTC.

Starting from January 2024, 11 Bitcoin spot ETFs were 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 further mainstreamed in the United States.

In March 2025, the United States established a "Strategic Bitcoin Reserve," using approximately 200,000 BTC held by the government as national reserve assets.

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

In the field of blockchain and Web3, on May 19, a bill to regulate the development of stablecoins passed a procedural vote in the Senate with a result of 66 votes in favor and 32 votes against, paving the way for the final signing of the bill. In the same month, the legislative council of a certain region 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, multiple well-known financial institutions are involved.

Stablecoins with a market capitalization exceeding $240 billion will enter an era of compliant development. Beyond Bitcoin, stablecoins are likely to become the second most widely adopted crypto asset and may also become the first killer application 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 incorporated 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. With the exception of a certain company, many companies worldwide are initiating accumulation plans for Bitcoin and other crypto assets (such as Ethereum and Solana).

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

Capital: Optimistic Pricing + Scale Expansion

During the sharp decline of the stock market in March and April, the inflow of Bitcoin spot ETFs came to a sudden halt, causing Bitcoin to adjust by more than 30% (the largest correction of this cycle) alongside the stock market. However, since April and May, with a strong rebound in the stock market, the buying power of Bitcoin spot ETFs has also strongly recovered, with inflows of $605 million and $2.775 billion respectively, helping Bitcoin recover all its losses and reach a historic high of $112,000.

In terms of stablecoins (not all used for cryptocurrency trading), the scale has also expanded, with inflows of 5.375 billion and 5.567 billion USD in April and May, respectively, but the changes in funds compared to Bitcoin spot ETF channels are relatively small.

It was previously pointed out that the pricing power of Bitcoin has been transferred from on-site funds to those controlled by spot ETF channels and similar institutions. Such institutions exhibit a long-term subjective bullish nature, primarily due to the continuous breakthrough developments in policies regarding Bitcoin and crypto assets. This is both the reason why Bitcoin was able to rebound quickly in April and May, surpassing the Nasdaq to set a new historical high, and the underlying logical support that allows for long-term optimism in the market.

However, it is important to note that the stock market has currently priced in an extremely optimistic outlook regarding the trade disputes, and it may imply that there will not be a significant recession in the U.S. economy. Currently, U.S. stocks are struggling to break new highs, and fluctuations are inevitable. Although certain institutions are continuously inflowing, the Bitcoin spot ETF is unlikely to show an independent trend distinct from the Nasdaq, so expecting Bitcoin to break new highs again in the short to medium term may be overly optimistic.

Chip Structure: The Stock of Bitcoin on Exchanges Continues to Decline

During the decline from March to April, long-term investors in BTC once again started to increase their holdings, objectively serving as a stabilizer to reduce market selling pressure.

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

In the previous cycle, when liquidity surged, long-term holders' choice to sell objectively restrained the price increase. However, during the price decline in the cycle, long-term holders slowed down their selling or even chose to increase their holdings, and this cycle is no exception.

The difference from previous cycles is that the "second sell-off" by long-term holders in the past would end the bull market, while after this round of "second sell-off," the market chose to continue rising. This change may be due to the inclusion of certain institutional investors in the structure of long-term holders, leading to a shift in market trends. Whether this change is permanent or temporary needs to be closely monitored.

Conclusion