Behind the historic new high of BTC: Strong capital inflow, the market awaits interest rate cuts to push higher.

BTC hits a new historical high, the market awaits interest rate cuts and further gains.

In May, the three major U.S. stock indices continued to rise strongly, with BTC reaching a new historical high. Despite the ongoing uncertainty in the global geopolitical situation, capital inflows surged, with over $2.7 billion flowing into the BTC spot ETF channel. Long-term holders are nearing peak positions, and the BTC holdings on exchanges continue to decline, reflecting a strong supply-demand relationship.

On the policy front, the state-level BTC reserve bill in the United States has made breakthrough progress. Legislation related to stablecoins has also passed in the Senate. The U.S. economic data is showing strong performance, the job market remains resilient, inflation continues to decline, and GDP expectations have started to be revised upwards. These factors could be the fundamental reasons driving the market strength.

However, the tariff dispute has not been fully resolved, and concerns about the U.S. debt issue still exist. Currently, the trends of the U.S. stock market and BTC have reflected quite optimistic expectations. In the near future, the market may digest uncertainties in a volatile manner, awaiting a potential interest rate cut in the third quarter.

EMC Labs May Report: BTC Hits New All-Time High, Awaiting Rate Cuts and Further Gains

Macroeconomics: Tariff Dispute Eases, US Economy May Experience "Mild Recession"

Since April, the global geopolitical game has tended to ease, and the political environment in the United States has gradually returned to rationality. Market expectations are returning to normal, driving financial assets to continue rebounding and achieving a relatively optimistic pricing.

The previous tariff dispute caused severe fluctuations in the U.S. financial markets, and, combined with strong opposition from the business community, the relevant policy stance has softened. In early May, major economies held the first round of trade negotiations, with both sides committing to mutually reduce the previously imposed high tariffs within the next 90 days and to continue discussions on economic and trade relations. This news propelled the S&P 500 index to surge by 3.26% on that day.

In April, the U.S. stock market began to rebound, essentially recovering the losses since the tariff dispute began. In May, as formal negotiations started, the U.S. stock market continued to rise. As of May 31, the Nasdaq, S&P 500, and Dow Jones indices recorded monthly gains of 9.56%, 6.15%, and 3.94%, respectively.

The rebound in April can be seen as a reflection of the waning panic sentiment and the softening of policy stance, rapidly pricing in the first phase of the tariff dispute. The rise in May reflects the market's optimistic expectations for the negotiation phase. From the currently available information, this pricing has become quite sufficient. Before any new breakthrough developments occur, a continued significant rise may lack support.

Economic data released in May showed that the annualized GDP of the United States shrank by 0.2% in the first quarter, slightly revised up from the initial value, but still reflecting some impact on the economy at the beginning of the year. However, recent GDP forecast data has shown a rebound. As of the end of May, a well-known forecasting model indicated that the GDP growth rate for the second quarter could reach 3.8%, reflecting optimistic sentiment following the easing of trade disputes.

Inflation data continues to improve. The PCE price index year-on-year announced in May has decreased for three consecutive months, falling to a low of 2.15%. Core PCE has dropped to 2.52%, reaching a new low since the pandemic and is gradually approaching the central bank's target of 2%.

The job market remains resilient. In April, non-farm payrolls increased by 177,000, higher than expected. The number of first-time unemployment claims in late May was 240,000, slightly above expectations, but still at a low level. The strong performance of employment data has alleviated market concerns about an economic recession on one hand, and on the other hand, it provides space for the central bank to continue focusing on inflation targets.

The Federal Reserve decided to keep interest rates unchanged for the third consecutive month at its May monetary policy meeting. Although it released some moderate signals during the turbulent financial markets, with the situation stabilizing, the Federal Reserve reiterated its focus on inflation and pointed out that the uncertainty brought about by tariff disputes could lead to a rebound in inflation.

The strong performance of the financial markets, combined with the fact that the tariff dispute has not been fully resolved and the risk of inflation rebounding, has led the market to believe that the Federal Reserve is unlikely to initiate interest rate cuts in the first half of the year. Currently, the market expects that the Federal Reserve may cut rates by 25 basis points in September and December this year. This expectation has somewhat limited the space for liquidity to drive asset prices further up.

Based on the current data and situation, the US stock market and BTC may maintain a volatile trend in the next two months, until the expectation of interest rate cuts in August possibly drives the market to new highs. This judgment includes the optimistic resolution of the tariff dispute, as well as the assumption that the US economy may experience a "mild recession."

EMC Labs May Report: BTC Hits New All-Time High, Awaiting Rate Cuts and Further Climb

Crypto Assets: Continuous Capital Inflows Drive BTC to New Highs

In May, the opening price of BTC was $94,182.55, the closing price was $104,645.87, with an increase of 11.11% throughout the month, a volatility of 19.79%, and trading volume decreased for two consecutive months.

From a technical perspective, after BTC price returned to the range of 90,000 to 110,000 USD in April, it broke through the historical high in May, reaching 112,000 USD, and standing above the bullish ascending trend line.

It is worth noting that, in the current high interest rate environment, retail investors have not formed decisive buying power. Since March of last year, the daily number of new BTC addresses has remained low.

The main driving force behind this round of increase comes from institutional investors. According to public data, a listed company has increased its holdings by 133,850 BTC this year, bringing its total holdings to 580,250 BTC.

Since the approval of 11 BTC spot ETFs in January 2024, the regulatory environment for crypto assets in the United States has been continuously improving. In March 2025, the U.S. government established a "Strategic Bitcoin Reserve," designating approximately 200,000 BTC as national reserve assets. Subsequently, several states began to promote state-level BTC reserve bills.

On May 7, New Hampshire became the first state in the United States to include cryptocurrencies in its strategic reserves, allowing up to 5% of state funds to be invested in cryptocurrencies. Related bills in Texas and Arizona have also been passed by the Senate and are awaiting the governor's signature to take effect.

In terms of stablecoin regulation, the U.S. Senate passed the procedural vote on the "GENIUS ACT" with a result of 66 votes in favor and 32 votes against. The Hong Kong Legislative Council also officially passed the draft regulation to establish a licensing system for fiat-backed stablecoin issuers.

Several large American banks are exploring collaboration to launch a joint stablecoin project. Currently, the participating institutions include JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.

The stablecoin market, with a scale exceeding $240 billion, is about to enter a stage of regulatory development. Stablecoins are expected to become the second widely adopted crypto asset after BTC, and may also become the first killer application in the Web3 space to break 1 billion users. This lays a foundational application for the development of blockchain, especially smart contract platforms.

As BTC and blockchain technology are incorporated into the compliance system, they are becoming a technological high ground that the United States must occupy. The investment and speculation sentiment triggered by this trend is spreading. In addition to the aforementioned listed companies, many companies globally, including a certain media group, are also launching accumulation plans for BTC and other crypto assets such as ETH and SOL.

The expansion of application scenarios, along with the FOMO feelings and purchasing power triggered by compliance breakthroughs, has become the fundamental driving force behind the price increase of BTC and other crypto assets.

EMC Labs May Report: BTC Hits New All-Time High, Awaiting Rate Cuts and Further Gains

Capital Flow: Optimistic Pricing Intensifies

During the sharp decline of the US stock market from March to April, the inflow momentum of BTC spot ETF funds paused, causing BTC to adjust more than 30% along with the US stocks. In April and May, as the US stock market rebounded strongly, the buying momentum of the BTC spot ETF also strongly recovered, with inflows of 605 million and 2.775 billion dollars respectively, driving BTC to recover all losses and set a new historical high of 112,000 dollars.

The stablecoin market (not all used for cryptocurrency trading) has also expanded, with inflows of $5.375 billion and $5.567 billion in April and May, respectively, but compared to the fluctuations in BTC spot ETF channel funds, the changes are relatively small.

The pricing power of BTC has shifted from on-exchange funds to the funds of BTC spot ETF channels and institutional investors. These institutions have shown a tendency to be long-term bullish, primarily due to the continuous groundbreaking progress of BTC and crypto assets in U.S. policy. This explains why BTC was able to rebound quickly in April-May and reach a historic high first, as well as providing fundamental logical support for the long-term bullish outlook on BTC.

However, it is important to note that the U.S. stock market has currently priced in a very optimistic outlook regarding the tariff dispute and may imply an assumption that the U.S. economy will not experience a severe recession. At present, the U.S. stock market finds it difficult to break through to new highs, and fluctuations are inevitable. Although some institutions continue to buy, the BTC spot ETF is hard to perform independently of the Nasdaq index, so expecting BTC to reach new highs in the short term may be overly optimistic.

EMC Labs May Report: BTC Hits New All-Time High, Awaiting Rate Cuts and Further Increases

EMC Labs May Report: BTC Hits New Historical High, Awaiting Rate Cuts and Further Gains

Position Structure: The inventory of BTC on the exchange continues to decline

During the decline in March and April, long-term investors in BTC began to increase their holdings again, which objectively played a role in reducing market selling pressure.

As of the end of May, the holdings of long-term holders reached 14.4199 million BTC, close to historical highs. Correspondingly, the BTC inventory on centralized exchanges continues to decline, currently only remaining at 2.9882 million BTC, nearing the levels of the end of November 2020.

In previous market cycles, when liquidity significantly increased, long-term holders choosing to sell often limited price increases. However, when prices declined during the cycle, long-term holders would slow down their selling or even increase their holdings, and this cycle is no exception.

The difference from previous cycles is that the "second sell-off" by long-term holders usually ended the bull market, whereas after the current "second sell-off", the market chose to continue rising. We believe this may be due to the inclusion of institutional investors such as listed companies in the structure of long-term holders, which has altered the market trend. Whether this change is sustainable still requires further observation.

EMC Labs May Report: BTC Hits New All-Time High, Awaiting Interest Rate Cuts and Further Advancements

EMC Labs May Report: BTC sets a new historical high, waiting for interest rate cuts and further advancements

Conclusion

Although we are optimistic about the application prospects and long-term trends of BTC, the strong performance of BTC's price in the short term has still exceeded even the most optimistic expectations.

The reason lies in the overly optimistic sentiment in the risk asset markets, including US stocks, and the investment and speculation frenzy triggered by BTC's significant application breakthroughs in the US. We remain confident about the latter, but the market's pricing of the tariff dispute may be overly optimistic, and there may still be fluctuations in between. Additionally, we have lowered our expectations for a rate cut by the Federal Reserve.

In March, we expected BTC to reverse in the summer, but the market reacted beyond expectations and reached a new high in May. Considering various uncertainties and the postponement of liquidity expectations, we believe that in the next two months, BTC is likely to fluctuate with the US stock market, and the possibility of reaching new highs and making significant upward moves is low.

If all goes well, BTC may have to wait until the third quarter to reach a new level.

EMC Labs May Report: BTC hits a historical high, waiting for interest rate cuts and further advancements

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ForkTonguevip
· 07-24 21:06
The bull run market has already been mentioned.
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GasFeePhobiavip
· 07-24 21:05
Indeed, it's still good to buy the dip.
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ApeWithAPlanvip
· 07-24 21:02
Retail investors still want to get on board, how funny.
View OriginalReply0
Layer3Dreamervip
· 07-24 20:59
theoretically speaking, this inflow pattern suggests recursive state transitions in btc's price discovery mechanism...
Reply0
HalfIsEmptyvip
· 07-24 20:55
The people who are bearish in a bull run are a bit miserable.
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TokenAlchemistvip
· 07-24 20:55
maxis keep seething while i farm alpha in asymmetric vectors tbh
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