The market, project, currency, and other information and views mentioned in this report are for reference only and do not constitute any investment advice.
The strong trend of the risk equity market has left Wall Street hedge funds stunned and made everyone doubt what hidden information they might have missed.
After 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 eased but has not made a breakthrough 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 trends this month have already included the most optimistic estimates. The market may oscillate to eliminate uncertainty, waiting for the interest rate cut in the third quarter.
Macro Finance: The Impact of "Reciprocal Tariffs" is Generating a "Mild Recession" in the U.S. Economy
In the April report, we pointed out that "the most painful moment has passed, and once Washington and the Federal Reserve return to a rational game state, the market should be able to return to its own operating rules". The facts show that global geopolitical games and the U.S. democratic system have defeated Trump's ambitions, and market expectations have ultimately returned to rationality, ushering in a continuous rebound and making the most optimistic pricing.
[The translation continues in the same manner for the entire text]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, 11 BTC Spot ETFs were approved, and in May 2024, the U.S. House of Representatives passed the Financial Innovation and Technology Act (FIT21), gradually establishing crypto assets and blockchain technology as key development areas in the United States. Subsequently, crypto assets represented by BTC have become further mainstream in the U.S.
In March 2025, U.S. President Trump signed an executive order to establish 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 cryptocurrency. Bitcoin reserve bills in Texas and Arizona have also passed Senate voting and are awaiting signature by the governors to take effect.
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 officially passed a bill on May 21st establishing a licensing system for fiat stablecoin issuers.
Several major U.S. banks are discussing collaboration to launch a joint stablecoin, including 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 + Expansion
During the U.S. stock market crash in March and April, BTC Spot ETF inflows suddenly 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 previous losses and set a new historical high of $112,000.
Capital Flow (Monthly)
Stablecoins (not entirely used for Crypto trading) have also expanded, with inflows of $5.375 billion and $5.567 billion in April and May, though the changes are relatively small compared to the BTC Spot ETF channel.
We previously noted that BTC pricing rights have been transferred from internal funds to BTC Spot ETF channel funds and institutional entities 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 explains both BTC's rapid rebound in April and May and outperforming the Nasdaq to create a new historical high, and provides 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 that the U.S. economy will not experience a significant recession. Currently, the U.S. is struggling to break new highs, and volatility is inevitable. While institutions like Strategy continue to flow in, and BTC Spot ETF is unlikely to create an independent trend different from the Nasdaq, expecting BTC to break new highs in the short to medium term is overly optimistic.
Chip Structure: Continuous Decline in BTC Exchange Inventory
During the downturn in March and April, long-term BTC investors again started accumulating, 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 holdings reached 14.4199 million coins, near a historical high, while centralized exchange inventory continues to decline, currently remaining at only 298,820 coins, close to the November 2020 level.
In previous cycles, when liquidity surged, long-term holders selling objectively restrained price increases, but during price declines, long-term holders would slow down selling or even accumulate, and this cycle is no exception.
The difference from previous cycles is that previously, "secondary selling" by long-term holders would end the bull market, but in this round, the market chose to continue upward after "secondary selling". We understand this as the inclusion of institutional entities like Strategy in the long-term holder structure, causing market trend changes. Whether this change is permanent or temporary remains to be closely monitored.
Conclusion
While we maintain a long-term optimistic attitude about BTC's use case expansion and long-term trend, the short-term 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 have priced the "equivalent tariff war" too optimistically, and there will inevitably be many twists and turns. Additionally, we have lowered our expectations for the Federal Reserve's interest rate decisions.
In our March report, we anticipated BTC would initiate a reversal in the summer, but the market response exceeded expectations, creating 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 to reach 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
EMC Labs (Emerging Labs) was created 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 to bring benefits to humanity.
For more information, please visit: https://www.emc.fund
