Author: 0xWeilan
The market, project, currency, and other information, views, and judgments mentioned in this report are for reference only and do not constitute any investment advice.
The strength of the risk equity market has left Wall Street hedge funds stunned, making everyone doubt what hidden information they might have missed. Following the rebound in April, the three major U.S. stock indexes continued to rise strongly, while BTC hit a new all-time high. Behind this, the "reciprocal tariff war" has somewhat eased but has not made breakthrough progress in reaching an agreement, and the "Russia-Ukraine war" remains stalled between negotiations and offensives. However, capital inflows are surging, with BTC Spot ETF channel inflows exceeding $2.7 billion. Long positions are approaching their peak, exchange holdings continue to decline, and BTC's supply and demand are very strong. On the policy front, the BTC reserve bill at the state level in the United States has also achieved a historic breakthrough. The "GENIUS ACT" related to stablecoins has also passed a Senate vote. The U.S. economic employment data is strong, inflation continues to decline, and GDP expectations are beginning to rise. This may be the fundamental reason for the market's strength. However, with the tariff war unresolved and the U.S. debt panic caused by the "Beautiful Big Plan" not yet dissipated, the U.S. stocks and BTC this month have already included the most optimistic estimates, and the future market may oscillate to eliminate uncertainty, waiting for the third quarter's interest rate cut. [The rest of the translation follows the same approach, maintaining the original structure and translating all text except for specific cryptocurrency abbreviations and proper nouns within angle brackets.]Based on the announcement data from Strategy, a company included in the Nasdaq 100, it has accumulated 133,850 coins since 2025, with a total holding of 580,250 coins.
Since January 2024, with 11 BTC Spot ETF approvals, and the U.S. House of Representatives passing the Financial Innovation and Technology Act (FIT21) in May 2024, crypto assets and blockchain technology have gradually been established as key development areas in the United States. Subsequently, crypto assets represented by BTC have become further mainstreamed in the U.S.
In March 2025, U.S. President Trump signed an executive order establishing a "Strategic Bitcoin Reserve", designating approximately 200,000 bitcoins held by the government as national reserve assets.
Afterward, over 20 U.S. states began proposing state-level bitcoin reserve bills. This demand saw a breakthrough in May. On May 7th, the New Hampshire governor signed a bill, becoming the first state to formally incorporate cryptocurrency into strategic reserves. The bill allows the state treasurer to invest up to 5% of state government funds in cryptocurrencies. Bitcoin reserve bills in Texas and Arizona have also passed Senate voting and are awaiting gubernatorial signatures.
On the blockchain and Web3 front, the GENIUS ACT regulating stablecoin development passed a procedural vote in the Senate on May 19th with 66 votes in favor and 32 against, paving the way for the final signing. In the same month, the Hong Kong Legislative Council formally passed a draft ordinance establishing a licensing system for fiat stablecoin issuers on the 21st.
Several major U.S. banks are discussing collaborative efforts to launch a joint stablecoin. Currently, this involves JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.
Stablecoins with an issuance scale exceeding $240 billion will now enter a compliant development era. Beyond BTC, stablecoins are highly likely to become the second widely adopted crypto asset and potentially the first killer application in the Web3 domain to break through 1 billion users. This establishes a use case foundation for blockchain, especially smart contract platforms.
After being incorporated into the compliance system, BTC and blockchain are becoming a technological high ground that the United States must occupy. The investment and speculative sentiment triggered by this trend is spreading. Following Strategy, multiple companies worldwide, including the Trump Media Group, are initiating accumulation plans for BTC and other crypto assets (such as ETH, SOL).
The expansion of use cases and the FOMO sentiment and purchasing power sparked by compliance breakthroughs have become the primary drivers of price increases for BTC and other crypto assets.
Funds: Optimistic Pricing + Use Case Expansion
During the U.S. stock market crash in March and April, BTC Spot ETF inflows abruptly stopped, causing BTC to adjust over 30% (the largest pullback in this cycle). However, from April to May, alongside a strong U.S. stock market rebound, BTC Spot ETF buying power has also strongly recovered, with inflows of $605 million and $2.775 billion respectively, pushing BTC to recover all losses and set a new historical high of $112,000.
Capital Flow (Monthly)
Regarding stablecoins (not entirely used for crypto trading), inflows were also amplified, with $5.375 billion and $5.567 billion in April and May respectively, but relatively small compared to BTC Spot ETF channel fund movements.
We previously noted that BTC pricing rights have been transferred from internal funds to BTC Spot ETF channel funds and institutions like Strategy. Such institutions exhibit long-term bullish characteristics, primarily due to continuous breakthrough progress of BTC and Crypto assets at the U.S. policy level. This is both the reason BTC rapidly rebounded in April and May, surpassing Nasdaq to create a historical high, and the underlying logical support for long-term optimism.
However, it's important to note that the U.S. stock market has already priced in trade war scenarios extremely optimistically, potentially implying the U.S. economy won't experience significant recession. Currently, the U.S. is struggling to break new highs, and market volatility is inevitable. While institutions like Strategy continue to flow in, and BTC Spot ETF is unlikely to create an independent trend different from Nasdaq, expecting BTC to break new highs in the short to medium term is overly optimistic.
Chip Structure: Continuous Decline in BTC Exchange Reserves
During the March-April decline, long-term BTC investors again initiated purchases, objectively acting as a balancing mechanism to reduce market selling pressure.
Long and Short Position Holding Structure (Monthly)
By the end of May, long-term holder scale reached 14.1999 million coins, near a historical high, while centralized exchange reserves continuously declined, currently remaining only 2.9882 million coins, close to November 2020 levels.
In previous cycles, when liquidity surged, long-term holders selling objectively restrained price increases, but during price declines, they would slow selling or even increase holdings, and this cycle is no exception.
The difference from previous cycles is that previously, long-term holders' "secondary selling" would end the bull market, but this time, the market chose to continue upward after "secondary selling". We understand this as the inclusion of institutions like Strategy in the long-term holder structure, causing market trend changes. Whether this change is permanent or temporary requires close observation.
Conclusion
Although we maintain a long-term optimistic attitude about BTC's use case expansion and long-term trend, the short-term BTC price strength and momentum still exceed our most optimistic estimates.
The reasons include excessive optimism in risk markets including U.S. stocks, and the investment and speculative fervor triggered by BTC's massive use case expansion in the United States. We are confident about the latter, but we believe the U.S. stock and BTC markets are overly optimistic about "equivalent tariff war" pricing, and there will inevitably be many twists and turns. Additionally, we have lowered our expectations for Federal Reserve interest rate cuts.
In our March report, we anticipated BTC would initiate a reversal in the summer, but the market response exceeded expectations, reaching new highs in May. Considering various uncertainties and delayed liquidity expectations, we believe that in the next two months, BTC will likely oscillate with U.S. stocks, and creating new highs and reaching a new price level is a low-probability event.
If everything goes smoothly, reaching a new level should be a story in the third quarter!
EMC Labs (Emerging Labs) was established in April 2023 by crypto asset investors and data scientists. Focusing on blockchain industry research and crypto secondary market investment, with industrial foresight, insights, and data mining as core competencies, committed to participating in the thriving blockchain industry through research and investment, and promoting blockchain and crypto assets' benefits for humanity.
