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

In May, the risk asset market performed strongly, with the three major US stock indices continuing to rise, and BTC even reaching a new all-time high. Despite the ongoing uncertainty in the geopolitical situation, capital inflows surged, with over $2.7 billion flowing into the BTC spot ETF channel. Long-term holders' positions are nearing highs, and exchange holdings continue to decline, keeping BTC's supply and demand strong.

On the policy front, the state-level BTC reserve bill in the U.S. has made significant progress, and the bill related to stablecoins has also passed a Senate vote. The U.S. employment data is strong, inflation continues to decline, and GDP expectations are starting to be revised upward. These factors may be the fundamental reasons driving the market stronger.

However, the tariff dispute has not been fully resolved, and concerns in the US bond market have not dissipated. The performance of US stocks and BTC this month has already reflected the most optimistic expectations, and the market may eliminate uncertainty in a fluctuating manner while awaiting the arrival of interest rate cuts in the third quarter.

Macroeconomics: Tariff Effects May Trigger a Mild Recession in the US

The global geopolitical game and the operation of the American democratic system have led market expectations to return to rationality, resulting in a sustained rebound and forming an optimistic pricing.

In early May, the US and China held the first round of trade negotiations in Switzerland, temporarily halting the intense tariff war. Both sides promised to mutually reduce the previously imposed high tariffs within 90 days and continue to negotiate on economic and trade relations. This news drove the S&P 500 to rise 3.26% that day.

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 tariff policies. The rise in May reflects the market's optimistic expectations for the second phase of trade negotiations. Current pricing is already relatively sufficient, and without new developments, a Fed rate cut, or improvements in geopolitical situations, continuing to rise significantly may lack caution.

Economic data released in May showed that the U.S. GDP contracted at an annualized rate of 0.2% in the first quarter, slightly better than the previous preliminary estimate. Consumer spending and imports weighed on the economic performance at the beginning of the year. However, GDP soft data rebounded, with the Atlanta Fed's GDP Now data reaching 3.8% by the end of May, reflecting optimism following the easing of tariff disputes.

Inflation data continues to improve, with the PCE annual rate declining for three consecutive months to 2.15%, and core PCE dropping to 2.52%, a new low since the pandemic, gradually approaching the Federal Reserve's target of 2%.

The job market performed strongly, with 177,000 new non-farm jobs added in April, exceeding expectations. This alleviates market concerns about an economic recession on one hand, while also supporting the Federal Reserve's continued focus on lowering inflation targets on the other.

The Federal Reserve has kept interest rates unchanged for three consecutive months. Despite some dovish statements, it still maintains a cautious stance after the stabilization of the financial markets, emphasizing that the uncertainty brought about by tariffs could lead to a rebound in inflation.

The market generally expects that the Federal Reserve will not initiate interest rate cuts in the first half of the year. CME FedWatch data shows that traders anticipate only two rate cuts this year, in September and December, each by 25 basis points. This expectation somewhat limits the space for liquidity to drive asset prices further up.

Based on the current data and situation, it is expected that the US stock market and BTC may remain volatile over the next two months, until the interest rate cut expectations in August may drive new highs. This judgment is based on the optimistic resolution of the tariff dispute and the relatively "mild" recession expectations for the US economy.

Considering that the GDP has already seen a slight contraction in the first quarter, if the GDP declines again in the second quarter, the U.S. economy may meet the criteria for a "mild recession". Therefore, starting interest rate cuts in September may be a more cautious expectation.

Crypto Assets: Capital Inflow Drives BTC to New Highs

In May, BTC started at 94182.55 USD and closed at 104645.87 USD, with a monthly increase of 11.11%, a volatility of 19.79%, and trading volume declining for two consecutive months.

From a technical perspective, the price of BTC returned to the "Trump bottom" (90,000-110,000 USD) in April, broke through the historical high of 112,000 USD, and is now above the "first bullish uptrend line."

In a high-interest rate environment, retail buying power is insufficient, and the daily new address count for BTC has been at a low level since March of last year. The rebound since April has mainly been driven by institutional forces.

According to an announcement from a company included in the NASDAQ-100 index, it has increased its holdings by 133,850 BTC since 2025, bringing its total holdings to 580,250 BTC.

In January 2024, 11 BTC spot ETFs were approved, and in May, the U.S. House of Representatives passed the "Financial Innovation and Technology Act," making crypto assets and blockchain technology gradually key development areas in the United States. The adoption of crypto assets such as BTC is 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, several states proposed state-level Bitcoin reserve bills. On May 7, New Hampshire became the first state in the nation to include cryptocurrency in its strategic reserves, allowing up to 5% of state government funds to be invested in cryptocurrency. Related bills in Texas and Arizona have also been passed by the Senate.

Regarding the regulation of stablecoins, the "GENIUS ACT" was passed in the Senate on May 19 with 66 votes in favor and 32 votes against through procedural voting. The Hong Kong Legislative Council also passed the draft ordinance on the 21st, establishing a licensing system for fiat stablecoin issuers.

Several major banks in the United States are exploring collaborations to launch a joint stablecoin, involving multiple well-known financial institutions. The stablecoin, with an issuance scale exceeding $240 billion, will enter the compliance development stage and is expected to become the first application in the Web3 field to break 1 billion users, laying the foundation for the development of blockchain and smart contract platforms.

BTC and blockchain are becoming a technological high ground that the United States must occupy, triggering a spread of investment and speculation sentiment. Several companies, including a certain media group, are launching accumulation plans for BTC and other crypto assets such as ETH and SOL.

The market sentiment driven by use case expansion and compliance breakthroughs has become the fundamental force behind the price increase of BTC and other crypto assets.

Capital: Optimistic Pricing + Expansion

During the period of the sharp decline in the US stock market from March to April, the inflow of funds into the BTC spot ETF stagnated, causing BTC to adjust over 30% along with the US stock market. In April and May, as the US stock market rebounded, the inflow of ETF funds strongly recovered, with inflows of $605 million and $2.775 billion respectively, pushing BTC to recover its losses and reach a new high of $112,000.

In terms of stablecoins, there were inflows of 5.375 billion and 5.567 billion USD in April and May, respectively, which is relatively small compared to the fluctuations in BTC spot ETF channel funds.

The pricing power of BTC has shifted from on-exchange funds to ETF channel funds and institutional investors. These institutions show a long-term bullish characteristic, backed by continuous breakthroughs of BTC and crypto assets at the policy level in the United States. This is both the reason for BTC's rapid rebound and early new highs in April and May, and the logical support for long-term optimism.

However, it should be noted that U.S. stocks are currently pricing in an extremely optimistic outlook regarding the tariff dispute, which may imply the assumption that the U.S. economy will not experience a significant recession. It will be difficult for U.S. stocks to break new highs, and volatility is inevitable. Although institutional funds continue to flow in, the BTC spot ETF is unlikely to perform independently of the Nasdaq index, so the expectation of BTC reaching new highs in the short term may be overly optimistic.

Chip Structure: The BTC Supply on Exchanges Continues to Decrease

During the decline from March to April, long-term BTC investors increased their holdings again, which objectively helps to reduce market selling pressure.

As of the end of May, the holdings of long-term holders reached 14.4199 million coins, approaching a historical high. Correspondingly, the inventory on centralized exchanges continues to decline, currently at only 2.9882 million coins, close to the level at the end of November 2020.

Unlike previous periods, the market continued to rise after the "secondary sell-off" by long-term holders in this round, possibly due to the inclusion of institutional investors in the structure of long-term holders, which has triggered changes in market trends. Whether this change is lasting still requires further observation.

Conclusion

Although I remain optimistic about the expansion of use cases for BTC and its long-term trends, the strength of BTC's price movement in the short term has exceeded expectations.

The reason lies in the overly optimistic risk market and the investment frenzy caused by the significant expansion of BTC use cases in the United States. We remain confident about the latter, but the market's pricing of the "tariff war" may be overly optimistic, and there will still be bumps along the way. In addition, we have lowered our expectations for a rate cut by the Federal Reserve.

Considering the many uncertain factors and delayed liquidity expectations, BTC may fluctuate with the US stock market in the next two months, with a low probability of hitting a new high.

If everything goes smoothly, BTC reaching a new level might be the story of the third quarter.