Author: 0xWeilan
The strong trend of 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 indices continued to rise strongly, and BTC reached a new historical 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 stuck between negotiations and offensives.
However, capital inflow is surging, with BTC Spot ETF channel inflow exceeding $2.7 billion. Long positions are approaching peak levels, exchange holdings continue to decline, and BTC 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 future market may oscillate to eliminate uncertainty, waiting for the interest rate cut in the third quarter.
Macro Finance: "Reciprocal Tariff" Impact 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 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 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, maintaining the original structure and translating all non-tagged text to English.]BTC New Addresses (Daily)
In the bottom-up rebound since April, the decisive force comes from institutions.
Strategy Company Holdings Statistics
Based on the announcement data of the Strategy company included in the Nasdaq 100, it has increased its holdings by 133,850 coins since 2025, with a total holding of 580,250 coins.
Since January 2024, with the approval of 11 BTC Spot ETFs and the passage of the Financial Innovation and Technology Act (FIT21) by the US House of Representatives in May 2024, crypto assets and blockchain technology have gradually been established as key development areas in the United States. Since then, crypto assets represented by BTC have become further mainstreamed in the US.
In March 2025, US 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.
Subsequently, over 20 US 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.
In the blockchain and Web3 domain, on May 19th, the 'GENIUS ACT' regulating stablecoin development passed a procedural vote in the Senate 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 bill on the 21st to establish a licensing system for fiat stablecoin issuers.
Multiple major US 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 like ETH and 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 + Forceful Expansion
During the US stock market crash in March and April, BTC Spot ETF inflows suddenly stopped, causing BTC to adjust by over 30% (the largest pullback in this cycle). However, with the strong rebound of US stocks from April to May, BTC Spot ETF buying power has also strongly recovered, with inflows of $605 million and $2.775 billion respectively, driving BTC to recover all previous losses and set a new historical high of $112,000.
Capital Flow (Monthly)
In terms of stablecoins (not entirely used for crypto trading), there has also been expansion, with inflows of $5.375 billion and $5.567 billion in April and May, but the changes are relatively small compared to the BTC Spot ETF channel.
We previously noted that BTC's pricing power has 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 the continuous breakthrough progress of BTC and crypto assets at the US policy level. This is both the reason why BTC quickly rebounded in April and May and outpaced the Nasdaq in creating a new historical high, and the underlying logical support for long-term optimism.
However, it's important to note that the US stock market has already priced in trade war scenarios extremely optimistically and may implicitly assume the US economy will not experience a significant recession. Currently, the US 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, it is overly optimistic to expect BTC to break new highs in the short to medium term.
Chip Structure: Continuous Decline in BTC Exchange Reserves
During the downturn in March and April, long-term BTC investors once again started accumulating, objectively acting as a balancing mechanism to reduce market selling pressure.
Long and Short-Term Holding Structure (Monthly)By the end of May, long-term holdings reached 14.4199 million coins, near a historical high, while centralized exchange reserves continue to decline, currently at only 2.9882 million coins, close to the level in November 2020.
In previous cycles, when liquidity surged, long-term holders selling objectively curbed price increases, but during price declines, long-term holders would slow down selling or even increase holdings, and this cycle is no exception.
The difference from previous cycles is that in the past, long-term holders' "secondary selling" would end the bull market, but this time, the market chose to continue upward. We understand this as the inclusion of institutions like Strategy in the long-term holder structure, which triggered changes in market trends. 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 current price strength and momentum still exceed our most optimistic estimates.
The reasons include the excessive optimism in risk markets, including US 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 US stock and BTC markets are overly optimistic about "equivalent trade war" pricing, and there will inevitably be many twists and turns. Additionally, we have lowered our expectations for the Federal Reserve's interest rate cuts.
In our March report, we anticipated BTC would launch a reversal trend in the summer, but the market response exceeded expectations, reaching a new high in May. Considering various uncertainties and delayed liquidity expectations, we believe that in the next two months, BTC will likely fluctuate with US stocks, and creating a new high and reaching a new price level is a low-probability event.
If everything goes smoothly, the next stage should be a story in the third quarter!
