BTC hits a new all-time high, waiting for interest rate cuts and further pump

The performance of risk assets in the market has been strong, surprising Wall Street hedge funds and leading many to wonder if they have missed some important information.

Following the rebound in April, the three major U.S. stock indices continued to rise strongly in May, while BTC reached a new all-time high.

Although the "tariff war" has eased somewhat, there has still been no breakthrough in reaching an agreement, and the "Russia-Ukraine conflict" remains in a tug-of-war between negotiations and warfare.

However, a large amount of funds has flowed in, with net inflows into BTC spot ETFs exceeding $2.7 billion. Long-term holders are approaching peak positions, and the amount of BTC held on exchanges continues to decline, indicating a very strong supply and demand situation for BTC.

At the policy level, several states in the U.S. have made historic breakthroughs with BTC reserve bills. The GENIUS ACT related to stablecoins has also passed the Senate vote.

The U.S. employment data performs strongly, inflation continues to decline, and GDP expectations are starting to be adjusted upwards. This may be the fundamental reason for the market's strength. However, the tariff issues remain unresolved, and concerns over U.S. debt triggered by the "Beautiful Great Plan" still exist. The performance of U.S. stocks and BTC this month has already incorporated the most optimistic expectations, and the market may experience fluctuations to eliminate uncertainties while waiting for a rate cut in the third quarter.

Macroeconomics: Tariff shocks may lead to a "mild recession" in the US

In the April report, we pointed out that "the most difficult period is over, and once Washington and the Federal Reserve return to rational gaming, the market should revert to its own operating rules." It has been proven that global geopolitical games and the U.S. democratic system have triumphed over the ambitions of certain individuals, and market expectations ultimately returned to rationality, ushering in a sustained rebound and achieving the most optimistic pricing.

The "stock, bond, and currency" triple kill triggered a violent shock in the US financial market, coupled with strong opposition from the business community, leading the tariff war to rapidly enter the second phase of "negotiation" in May and begin the third phase, with the UK being the first to reach a tariff agreement.

In early May, the US and China held the first round of trade negotiations in Switzerland, pausing the intense tariff war between the two countries that had lasted for over a month. On May 12, both sides issued a joint statement, promising 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 surged by 3.26%.

In early April, as the tariff stance softened, the US stock market launched a major counterattack, essentially recovering the losses since the tariff war began. In May, with the formal contact negotiations between the US and China, 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 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 a softening stance on tariffs, marking a rapid pricing after the completion of the first phase of the tariff war. The rise in May indicates an optimistic pricing towards the negotiations of the second phase of the tariff war (. Based on the currently available information, this pricing has been fully and optimistically reflected. Before there are new developments in the tariff war, interest rate cuts by the Federal Reserve, and further progress in the "Russia-Ukraine conflict", we believe that continuing to price in a significant rise is not cautious enough.

The pricing in May has already accounted for the relatively "strong" performance of the US economy and employment fundamentals.

The data released at the end of May showed that the annualized GDP of the United States shrank by 0.2% in the first quarter. This is slightly better than the previous initial value of )-0.3%(, but it still indicates that consumption spending and imports have weighed on the U.S. economy, causing some damage at the beginning of the year.

After being underestimated for the past few months, GDP soft data rebounded. The Atlanta Fed's GDP Now data 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 optimistic sentiment following the easing of the trade war.

The PCE data closely monitored by the Federal Reserve, released in May, shows that inflation continues to slow down, with the PCE annual rate dropping for the third consecutive month to 2.15%, and the core PCE falling to 2.52%, a new low since the pandemic, gradually approaching the Federal Reserve's 2% target.

Employment data exceeded expectations. At the beginning of May, the U.S. Bureau of Labor Statistics announced that non-farm employment added 177,000 jobs in April 2024, higher than the expected 138,000. As of the week ending May 24, the number of first-time unemployment claims was 240,000, an increase of 14,000 from the previous week, higher than the expected 230,000. Strong employment, on one hand, alleviates market concerns about a recession in the U.S. economy, and on the other hand, allows the Federal Reserve to focus on its "inflation reduction" target.

This month, the Federal Reserve decided to hold steady for three consecutive months. Although some "dovish" comments were released during the "triple kill" period, after the financial market stabilized, it still held firm under pressure to keep interest rates unchanged and emphasized that the uncertainty caused by tariffs could lead to a rebound in inflation.

The strong performance of the financial markets, combined with the ongoing trade war and the potential rebound in inflation, has led the market to believe that the Federal Reserve is unlikely to restart interest rate cuts in the first half of the year. The latest CME FedWatch data shows that traders expect only two rate cuts this year, in September and December, each by 25 basis points. This expectation effectively limits the liquidity-driven substantial rise of U.S. stocks and crypto assets.

Based on the current data and situation, we expect that the US stock market and BTC will likely remain volatile for the next two months, until the interest rate cut expectations in August may drive the US stock market and BTC to new highs. This judgment includes an optimistic outcome of the trade war, as well as a relatively "mild" recession in the US economy.

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

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Cryptocurrency: Large inflows drive BTC to new highs

In May, BTC opened at 94182.55 USD and closed at 104645.87 USD, rising by 11.11% over the month, with a volatility of 19.79%, and the trading volume has decreased for two consecutive months.

From the technical indicators we have been continuously monitoring, the BTC price returned to the "Trump bottom" ) between 100,000 and 110,000 in April, reaching a new high of 112,000 USD, and rising above the "first bullish upward trend line".

In a high interest rate environment, retail investors have not formed a truly decisive buying power, and in fact, the daily new addresses for BTC have fallen to a low since March of last year.

The decisive force behind the rebound since April comes from institutions.

According to the announcement from Strategy Company, it has increased its holdings by 133,850 BTC since 2025, bringing the total holdings to 580,250 BTC.

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

In March 2025, the U.S. government established a "Strategic Bitcoin Reserve," allocating approximately 200,000 BTC as national reserve assets.

Subsequently, more than 20 states began proposing state-level Bitcoin reserve bills. May also saw breakthroughs. On May 7, New Hampshire became the first state to officially incorporate cryptocurrency into its strategic reserves. The bill allows the state treasurer to invest up to 5% of state government funds in cryptocurrency. Related bills in Texas and Arizona have also been voted on by the Senate and are awaiting the governor's signature to take effect.

In the fields of blockchain and Web3, the "GENIUS ACT" regulating the development of stablecoins was passed in the Senate with 66 votes in favor and 32 against in a procedural vote on May 19, paving the way for final signing. In the same month, on the 21st, the Hong Kong Legislative Council officially passed a bill to establish a licensing system for statutory currency stablecoin issuers.

Several major American banks are exploring collaboration to launch a joint stablecoin, involving JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and others.

Stablecoins with an issuance scale exceeding 240 billion USD will enter the era of compliant development. Beyond BTC, stablecoins are likely to become the second widely adopted crypto asset and could also become the first killer application in the Web3 space to surpass 1 billion users. This lays the foundational use case for the vigorous development of blockchain, especially smart contract platforms.

After being incorporated into the compliance system, BTC and blockchain are becoming the technological high ground that the United States must occupy. The investment and speculative sentiment triggered by this trend is spreading. In addition to Strategy, many companies around the world, including a certain media group, are launching accumulation plans for BTC and other crypto assets ( such as ETH and SOL ).

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

Capital: Optimistic Pricing + Scale Expansion

During the sharp decline of the U.S. stock market from March to April, the inflow of BTC spot ETFs came to a sudden halt, causing BTC to adjust over 30% along with the U.S. stocks (, which was the largest pullback in this round ). However, from April to May, as the U.S. stocks rebounded strongly, the buying power of BTC spot ETFs also strongly recovered, with inflows of 605 million and 2.775 billion USD respectively, driving BTC to recover all its losses and reach a new high of 112,000 USD.

In terms of stablecoins, ( is not all used for crypto trading; ) has also expanded. In April and May, respectively, 5.375 billion and 5.567 billion dollars flowed in, but compared to the fund movement of the BTC spot ETF channel, the changes are relatively small.

Previously, we pointed out that the pricing power of BTC has been transferred from on-site funds to the funds of BTC spot ETF channels and similar strategy institutions. These institutions exhibit a long-term subjective bullish attribute, backed by the continuous breakthrough progress of BTC and crypto assets at the policy level in the United States. This is not only the reason for BTC's rapid rebound in April-May, surpassing the Nasdaq to reach a new high first, but also the underlying logical support for long-term optimism.

However, it should be noted that the US stock market has currently priced in an extremely optimistic outlook regarding the trade war, and may imply that the US economy will not experience a significant recession. Currently, the US stock market is struggling to break new highs, and fluctuations are inevitable. Although institutions like Strategy continue to invest, the BTC spot ETF is unlikely to develop an independent trend distinct from the Nasdaq, so it is overly optimistic to expect BTC to hit new highs in the short to medium term.

Chip Structure: Exchange BTC Supply Continues to Decline

In the decline from March to April, BTC long-term investors have once again started to increase their holdings, which objectively serves as a balancing mechanism to reduce market selling pressure.

As of the end of May, Chang has a holding scale of 14.4199 million pieces, close to the historical high point, while the corresponding stock of centralized exchanges continues to decline, currently only remaining at 2.9882 million pieces, close to the level at the end of November 2020.

In the previous cycle, when liquidity surged, long positions choosing to sell objectively suppressed the price rise. However, when the price fell during the cycle, long positions would slow down selling or even choose to increase their holdings, and this cycle is no exception.

What distinguishes this cycle from previous ones is that the "second sell-off" by long-term holders in the past would end a bull market, whereas after this round of "second sell-off", the market has chosen to continue to rise. We believe this is due to the inclusion of Strategy-type institutions in the long-term holder structure, which has altered the market trend. Whether this change is permanent or temporary needs to be closely monitored.

Conclusion

Although we are optimistic about the expansion of BTC applications and long-term trends, the strength of the BTC price and the intensity of its rise in the short term still exceed our most optimistic estimates.

The reason lies in the overly optimistic sentiment in risk markets, including the US stock market, and the investment and speculation frenzy triggered by the significant application expansion of BTC in the United States. We are confident about the latter, but we believe the pricing of the "trade war" in the US stock market and BTC market is too optimistic, and there will still be many twists and turns in between. In addition, we have lowered our expectations for the Fed's rate cuts.