EMC Labs May Report: BTC Hits New All-Time High, Awaiting Rate Cuts and Further Ascents

The information, opinions, and judgments regarding markets, projects, cryptocurrencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.

The strong trend of the risk equity markets has left Wall Street hedge funds stunned, making everyone question what implicit information they might have missed.

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

Behind this, although the "reciprocal tariff war" has eased, there has still been no breakthrough in reaching an agreement, and the "Russia-Ukraine war" remains stuck in a stalemate between negotiation and offense.

However, the influx of funds is surging, with over 2.7 billion flowing into the BTC Spot ETF channel. Long positions are approaching high levels, while exchange holdings continue to decline, indicating a very strong supply and demand situation for BTC.

On the policy front, the BTC reserve bill at the state level in the United States has also achieved a historic breakthrough. The stability coin-related "GENIUS ACT" has also passed the Senate vote.

The strong employment data of the US economy, continuous inflation decline, and rising GDP expectations may be the fundamental reasons for the market's strength. However, the trade war remains unresolved, and the panic caused by the "Beautiful Big Plan" regarding US debt has not dissipated. The movements of US stocks and BTC this month have already incorporated the most optimistic estimates. The market may experience fluctuations to eliminate uncertainty while waiting for interest rate cuts in the third quarter.

Macroeconomics: The impact of "reciprocal tariffs" is prompting a "mild recession" in the US 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 the global geopolitical game, as well as the victory of the American democratic system over the ambitions of the 'mad king' Trump, have led market expectations to ultimately return to rationality, ushering in a sustained rebound and leading to the most optimistic pricing.

The continuous occurrence of the "stock-bond-foreign exchange" triple kill has triggered a violent shock in the US financial market. Coupled with strong opposition from the business community, Trump was forced to make concessions. The "reciprocal tariff war" he initiated quickly entered the second phase of "negotiation" in May and began to enter the third phase, first reaching a tariff agreement with the UK.

In early May, the US and China held the first round of trade negotiations in Switzerland, pausing the intense tariff war that had lasted for more than a month. On May 12 (Eastern Time), both sides issued a joint statement, committing to mutual reductions of 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 jumped 3.26%.

In early April, as Trump "softened", U.S. stocks launched a major counteroffensive, falling since the tariff war in April. In May, with the formal engagement negotiations between the United States and China, the stagnant U.S. stock market was once again helped and continued to attack. As of the 31st, the Nasdaq, S&P 500, and Dow Jones recorded monthly gains of 9.56%, 6.15%, and 3.94%, respectively.

The rebound of the US stock market in April will be viewed as a reflection of the end of panic selling and Trump's softening stance, representing a quick pricing after the completion of the first phase of the "tariff war". The rise in May signifies optimistic pricing for the second phase (negotiations) of the "tariff war". Based on the currently available information, this pricing is ample and optimistic. We believe it is somewhat imprudent to continue significantly upward pricing before new developments in the tariff war, interest rate cuts by the Federal Reserve, and further progress in the "Russia-Ukraine war."

The pricing for May has already reflected the relatively "strong" performance of the U.S. economy and job market.

The economic data released at the end of May indicates that the U.S. economy contracted at an annual rate of 0.2% in the first quarter. This data has been slightly revised upward from the previously announced initial value (a contraction of 0.3%), but it still shows that the U.S. economy has suffered some damage since the beginning of the year due to the drag from consumer spending and imports.

After experiencing underestimation in the past few months, GDP soft data recorded a rebound. The GDP Now data released by the Atlanta Federal Reserve shows that since the end of April, data has returned above the zero line, reaching 3.8% by the end of May, reflecting optimism following the slowdown in the trade war.

GDP Now data

The PCE data, which the Federal Reserve is most concerned about and was released in May, shows that inflation continues to slow down, with the PCE annual rate falling for three consecutive months to a low of 2.15%, and core PCE dropping to 2.52%, the lowest since the pandemic, gradually approaching the 2% that the Federal Reserve aims for.

U.S. PCE data

Employment data exceeded market expectations. At the beginning of May, the U.S. Bureau of Labor Statistics released that in April 2024, non-farm payrolls added 177,000 jobs, higher than the market expectation of 138,000 jobs. As of the week ending May 24, 2025, the number of initial jobless claims was 240,000, an increase of 14,000 from the previous week (revised to 226,000), exceeding the market expectation of 230,000. The strong performance of employment data has, on one hand, alleviated market concerns about a recession in the U.S. economy and, on the other hand, also refocused the Federal Reserve on its goal of "reducing inflation."

This month, the Federal Reserve's interest rate meeting decided to halt rate increases for three consecutive months. Although the Fed had released some "dovish" statements to the market during the "triple kill" in stocks, bonds, and currencies, it remained steady under the immense pressure from President Trump after the financial markets stabilized, emphasizing that the uncertainty caused by tariffs could lead to a rebound in inflation data.

The strong performance of financial markets, coupled with the fact that the "reciprocal tariff" war is still not over, and inflation may rebound, make it impossible for the market to judge that the Fed will resume cutting interest rates in the first half of the year. The latest CME FedWatch data suggests that traders are betting that the U.S. will cut interest rates only twice this year, in September and December, by 25 basis points each. This expectation effectively "contains" the room for liquidity-driven sharp gains in U.S. stocks and crypto assets.

Based on the current data and situation, we expect that US stocks and BTC are likely to remain volatile in the next 2 months, and it is not until August that the expectation of a rate cut may push US stocks and BTC to record highs. This judgment included an optimistic end to the "reciprocal tariff war" and a relatively "mild" recession in the US economy.

U.S. GDP recorded a recession of -0.21% in Q1, and the fall in consumer confidence and market chaos triggered by the "reciprocal tariff war" in Q2 would meet the criteria of a "mild recession" if it triggers a slight decline in Q2 GDP, so a rate cut in September may be a more cautious expectation.

Crypto Assets: Robust Capital Inflows Drive BTC to New All-Time Highs

In May, BTC opened at $94182.55 and closed at $104645.87, an increase of $10463.33 for the month, which is 11.11%. The volatility was 19.79%, and the trading volume has decreased for two consecutive months.

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BTC price monthly chart

According to the technical indicators we are continuously monitoring, the BTC price returned to the "Trump bottom" ($90,000 ~ $110,000) in April, setting a new historical record of $112,000, and surged above the "first bullish upward trend line."

In a high-interest-rate environment, retail investors have not formed a real decisive buying force; in fact, since March of last year, the daily new BTC addresses have dropped to a low level.

New BTC Address (Daily)

Since the bottom rebound in April, the decisive force comes from institutions.

Strategy Company Position Statistics

Based on the announcement data from Strategy Company, which is included in the Nasdaq 100, it has increased its holdings by 133,850 since 2025, bringing its total holdings to 580,250.

Starting from January 2024, 11 BTC Spot ETFs were approved. In May 2024, the U.S. House of Representatives passed the Financial Innovation and Technology Act (FIT21), establishing crypto assets and blockchain technology as key areas for development in the U.S. Subsequently, the adoption of crypto assets, represented by BTC, became further mainstream 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.

After that, more than 20 states in the United States began to propose state-level Bitcoin reserve bills. This demand also made a breakthrough in May. On May 7, the governor of New Hampshire signed a bill, becoming the first state in the country to officially include cryptocurrency in its strategic reserves. The bill allows the state treasurer to invest up to 5% of state government funds in cryptocurrency. Related Bitcoin reserve bills in Texas and Arizona have also received Senate votes and are submitted to the governors of the two states for signing and enactment.

At the blockchain and Web3 level, the GENIUS ACT, which regulates the development of stablecoins, passed a procedural vote in the Senate with 66 votes in favor and 32 votes against on May 19, paving the way for the final signing of the bill. In the same month, the Hong Kong Legislative Council formally passed a bill on the 21st to establish a licensing regime for fiat currency stablecoin issuers.

Several major American banks are exploring cooperation to launch a joint stablecoin. Currently involved are JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.

The issuance scale of stablecoins exceeding 240 billion dollars will usher in the era of compliant development. Beyond BTC, stablecoins are likely to become the second widely adopted cryptocurrency, and are very likely to become the first killer application in the Web3 field to break 1 billion users. This lays a use case foundation for the vigorous development of 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 speculation sentiment triggered by this trend is spreading. Following Strategy, multiple companies around the world, including the Trump 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 triggered by regulatory breakthroughs, has become the fundamental driving force behind the rise in the prices of BTC and other crypto assets.

Capital: Optimistic Pricing + Forceful Expansion

During the collapse of U.S. stocks in March and April, the inflow of BTC Spot ETF came to an abrupt end, triggering BTC to adjust by more than 30% with U.S. stocks (the largest correction in this cycle), and since April and May, with a strong rebound in U.S. stocks, BTC Spot ETF buying power has also recovered strongly, with inflows of $605 million and $2.775 billion, respectively, pushing BTC to recover all losses and refresh an all-time high of $112,000.

Capital Flow (Monthly)

In terms of stablecoins (not all used for Crypto trading), there has also been an increase, with inflows of 5.375 billion and 5.567 billion dollars in April and May respectively, but the funds flowing through the BTC Spot ETF channel have changed little.

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 institutions like Strategy. These institutions exhibit a long-term subjective bullish attribute, which is fundamentally due to the continuous breakthrough progress of BTC and Crypto assets at the policy level in the United States. This is both the reason why BTC was able to rapidly rebound in April and May and surpass the Nasdaq to create a historical high, as well as the underlying logical support for a long-term optimistic outlook in the future.

However, it should be noted that US stocks are currently pricing in an extremely optimistic tariff war, which may imply the premise that there will be no sharp recession in the US economy. At present, it is difficult for the United States to break through new highs, and shocks are inevitable. Although institutions such as Strategy continue to flow in, and BTC Spot ETF is difficult to get out of the independent market that distinguishes the Nasdaq, it is too optimistic to expect BTC to break new highs in the short to medium term.

Chip Structure: Exchange BTC Inventory Continues to Decline

During the decline in March to April, long-term BTC investors initiated accumulation again, objectively serving as a balancing force to reduce market selling pressure.

Long and Short Holding Position Structure (Monthly)

By the end of May, the long-held scale reached 14.4199 million pieces, near a historical high point, while the corresponding stock scale of centralized exchanges has been continuously declining, currently remaining at only 2.9882 million pieces, close to the level at the end of November 2020.

During the previous cycle, when liquidity surged, long positions objectively restrained the price increase. However, when prices fell during the cycle, long positions would slow down their selling or even turn to increase their holdings, and this cycle is no exception.

The difference from the previous cycle is that the previous "secondary sell-off" of long hands would end the bull market, but after this round of "secondary sell-off", the market chose to continue to rise, which we understand as the addition of a strategy institution to the long-hand structure, which triggered a change in market trend. Whether this change is permanent or temporary requires close attention.

Conclusion

Although we are optimistic about the expansion of BTC use cases and its long-term trend based on long-termism, the strength of BTC's price and the ferocity of its trend in the short term still exceed our most optimistic estimates.

The reason lies in the excessive optimism in the risk markets, including US stocks, and the investment and speculation frenzy triggered by BTC's significant use case expansion in the United States. We are confident about the latter, but we believe the pricing of the "reciprocal tariff war" in the US stock and BTC markets is too optimistic, and there will inevitably be many twists and turns in between. Additionally, we have lowered our expectations for the Federal Reserve's interest rate hikes.

In the March report, we anticipated that BTC would begin a reversal trend in the summer, but the market reacted beyond expectations, reaching a new high in May. Considering various uncertainties and the delayed liquidity expectations, we believe that in the following two months, BTC will likely fluctuate alongside the US stocks, and achieving a new high to reach a new price level is a low probability event.

If all goes well, the next step should be the story of the third quarter!

EMC Labs

EMC Labs, established in April 2023 by cryptocurrency asset investors and data scientists, focuses on research in the blockchain industry and investments in the crypto secondary market. With industry foresight, insights, and data mining as its core competencies, it is dedicated to participating in the thriving blockchain industry through research and investment, promoting the benefits of blockchain and cryptocurrency assets for humanity.

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