The information, opinions and judgments on markets, projects, currencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.
The strength of the risk-equity market has stunned Wall Street hedge funds and made everyone wonder what implicit information they have missed.
Following the April rebound, the three major U.S. stock indices continued to rise strongly, while BTC hit a new all-time high.
Behind this, although the reciprocal tariff war has eased, there has been no breakthrough progress in reaching an agreement, and the Russia-Ukraine War is still stuck between negotiation and attack.
However, the inflow of funds is surging, with over 2.7 billion inflows into the BTC Spot ETF channel. Long positions are approaching highs, and exchange positions continue to decline, indicating that the supply and demand of BTC is very strong.
On the policy side, the US state-level BTC reserve bill also achieved a historic breakthrough. The GENIUS ACT related to stablecoins also passed the Senate vote.
The US economic employment data is strong, inflation continues to decline, and GDP expectations are starting to rise. This may be the fundamental reason for the markets strength. However, the tariff war has not yet ended, and the panic over US debt caused by the Beautiful Plan has not yet subsided. The trend of US stocks and BTC this month has already included the most optimistic estimates. The market may fluctuate to eliminate uncertainty and wait for the interest rate cut in the third quarter.
Macro Finance: The impact of reciprocal tariffs is causing a mild recession in the US economy
In our April report , we pointed out that the most painful moment has passed, and when Washington and the Federal Reserve return to a state of rational game, the market should be able to return to its own operating rules. Facts show that the global geopolitical game and the American democratic system have defeated the ambitions of the mad king Trump. Market expectations have finally returned to rationality, ushered in a sustained rebound, and made the most optimistic pricing.
The consecutive stock, bond and currency triple kills triggered violent turbulence in the U.S. 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 negotiations in May and began to enter the third phase, and took the lead in reaching a tariff agreement with the United Kingdom.
In early May, the United States and China held their first round of trade negotiations in Switzerland, which put the two countries on hold in their fierce tariff war that lasted for more than a month. The two sides issued a joint statement on May 12 (Eastern Time of the United States), promising to reduce the high tariffs previously imposed on each other in the next 90 days and to continue negotiations on economic and trade relations. The SP 500 jumped 3.26% that day.
In early April, as Trump softened, the US stock market launched a major counterattack, and basically recovered the losses since the tariff war in April. In May, with the formal contact and negotiation between the United States and China, the stagnant US stock market was boosted again and continued to rise. As of the 31st, the Nasdaq, SP 500 and Dow Jones indexes recorded monthly gains of 9.56%, 6.15% and 3.94% respectively.
We will regard the rebound of US stocks in April as a reflection of the end of panic selling and Trumps softening, which is a rapid pricing after the completion of the first phase of the reciprocal tariff war. The rise in May means optimistic pricing for the second phase (negotiation) of the reciprocal tariff war. Based on the current public information, this pricing is sufficient and optimistic. Before there is new progress in the tariff war, the Feds interest rate cut, and further progress in the Russia-Ukraine War, we believe that it is imprudent to continue to price sharply upward.
May pricing already incorporates relatively “strong” performance in U.S. economic and employment fundamentals.
Economic data released at the end of May showed that the US economy shrank by 0.2% on an annualized basis in the first quarter. This data was slightly revised up compared to the previously announced initial value (shrinking by 0.3%), but it still showed that the US economy suffered some damage since the beginning of the year due to consumer spending and imports.
After being underestimated in the past few months, soft GDP data recorded a rebound. The GDP Now data released by the Federal Reserve Bank of Atlanta showed that the data returned to above the zero axis since the end of April and reached 3.8% by the end of May, showing optimism after the tariff war slowed down.
GDP Now Data
The PCE data released in May, which is the most concerned by the Federal Reserve, showed that inflation continued to slow down. The annual PCE rate fell for three consecutive months to a low of 2.15%, and the core PCE fell to 2.52%, the lowest since the epidemic, and is gradually approaching the 2% that the Federal Reserve expects to increase interest rates.
US PCE data
The employment data exceeded market expectations. In early May, the U.S. Bureau of Labor Statistics announced that non-farm payrolls in April 2024 increased by 177,000, 138,000 higher than market expectations. As of the week of May 24, 2025, the number of first-time unemployment claims was 240,000, an increase of 14,000 from the previous week (revised to 226,000), and 230,000 higher than market expectations. The strong performance of the employment data, on the one hand, eliminated market concerns about the U.S. economic recession, and on the other hand, made the Federal Reserve focus on its goal of lowering inflation.
This month, the Federal Reserve decided to stop cutting interest rates for three consecutive months at its interest rate meeting. Although the Federal Reserve had released some dovish remarks to the market during the triple kill of stocks, bonds and currencies, after the financial market stabilized, it continued to remain on hold despite the huge pressure from President Trump, and emphasized that the uncertainty caused by tariffs may lead to a rebound in inflation data.
The strong performance of financial markets, coupled with the fact that the reciprocal tariff war has not yet ended and inflation may rebound, has led the market to judge that the Fed is unlikely to resume interest rate cuts in the first half of the year. The latest data from CME FedWatch shows that traders are betting that the United States will only cut interest rates twice this year, in September and December, each time by 25 basis points. This expectation has in fact curbed the space for a sharp rise in U.S. stocks and crypto assets driven by liquidity.
Based on current data and circumstances, we expect that the US stock market and BTC will likely remain volatile in the next two months, until the expected rate cut in August, which may push the US stock market and BTC to record highs. This judgment includes an optimistic ending to the reciprocal tariff war and a relatively mild recession in the US economy.
The U.S. GDP recorded a recession of -0.21% in Q1, and the decline in consumer confidence and market turmoil caused by the reciprocal tariff war in Q2, if it causes a slight decline in Q2 GDP, will meet the standard of a mild recession, so starting a rate cut in September may be a more cautious expectation.
Crypto assets: Strong capital inflows push BTC to a new all-time high
In May, BTC opened at $94,182.55 and closed at $104,645.87, with a monthly increase of $10,463.33, or 11.11%, with an amplitude of 19.79%. The trading volume has been declining for two consecutive months.
BTC price monthly chart
According to the technical indicators we continue to monitor, after BTC price returned to the Trump bottom (US$90,000-110,000) in April, it set a new all-time high of US$112,000 and jumped above the bull market first rising trend line.
In a high-interest environment, retail investors have not formed a real decisive buying power. In fact, the number of new BTC addresses per day has fallen to a low level since March last year.
BTC New Addresses (Daily)
In the rebound from bottoming out since April, the decisive force came from institutions.
Strategy Company Position Statistics
Based on the announcement data of Strategy, which is included in the Nasdaq 100, it has increased its holdings by 133,850 since 2025, and its total holdings have reached 580,250.
Since January 2024, 11 BTC Spot ETFs have been approved. In May 2024, the U.S. House of Representatives passed the Financial Innovation and Technology Act (FIT21), and crypto assets and blockchain technology have gradually been established as key development areas in the United States. Since then, the adoption of crypto assets represented by BTC has become more mainstream in the United States.
In March 2025, U.S. President Trump signed an executive order to establish a Strategic Bitcoin Reserve and to use the approximately 200,000 bitcoins held by the government as a national reserve asset.
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 the bill, becoming the first state in the United States to officially include cryptocurrency in its strategic reserves. The bill allows the state treasurer to invest up to 5% of state government funds in cryptocurrencies. The relevant Bitcoin reserve bills in Texas and Arizona have also been voted on by the Senate and submitted to the governors of the two states for signature and implementation.
On the blockchain and Web3 level, on May 19, 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, paving the way for the final signing of the bill. In the same month, the Hong Kong Legislative Council formally passed a draft bill on the 21st to establish a licensing system for fiat stablecoin issuers.
Several large US banks are exploring cooperation to launch a joint stablecoin, including JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, etc.
Stablecoins with an issuance scale of more than 240 billion US dollars will enter the era of compliant development. In addition to BTC, stablecoins are likely to become the second widely adopted crypto asset, and are also likely to become the first killer application in the Web3 field to exceed 1 billion users. This lays the foundation for the booming use case 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 speculative sentiment triggered by this trend is spreading. Following Strategy, many companies around the world, including Trump Media Group, are launching hoarding plans for BTC and other crypto assets (such as ETH and SOL).
The expansion of use cases, as well as the FOMO sentiment and purchasing power stimulated by compliance breakthroughs have become the fundamental driving forces behind the rise in prices of BTC and other crypto assets.
Funding: Optimistic pricing + aggressive expansion
During the plunge of the U.S. stock market in March and April, the inflow trend of BTC Spot ETF came to an abrupt halt, causing BTC to adjust by more than 30% along with the U.S. stock market (the largest correction in this cycle). Since April and May, with the strong rebound of the U.S. stock market, the buying power of BTC Spot ETF has also recovered strongly, with inflows of US$6.05 billion and US$2.775 billion respectively, pushing BTC to recover all its losses and set a new historical high of US$112,000.
Capital Flow(month)
In terms of stablecoins (not all of which are used for Crypto transactions), there has also been an increase, with inflows of US$5.375 billion and US$5.567 billion in April and May respectively, but the funds in the intersecting BTC Spot ETF channel have changed little.
Previously, we pointed out that the pricing power of BTC has been handed over from on-site funds to BTC Spot ETF channel funds and similar Strategy institutions. Such institutions have shown the attribute of long-term subjective bulls, and the reason behind this is that BTC and Crypto assets have continuously made breakthrough progress at the US policy level. This is not only the reason why BTC was able to rebound quickly in April and May and surpass the Nasdaq to set a new record high, but also the underlying logic support for the long-term optimism in the future market.
However, it should be noted that the US stock market has already made extremely optimistic pricing for the tariff war, and may imply the premise that the US economy will not experience a sharp recession. It is difficult for the US to break new highs at present, and volatility is inevitable. Although institutions such as Strategy continue to flow in, BTC Spot ETF is difficult to break out of the independent market trend that is different from the Nasdaq, so it is too optimistic to expect BTC to break new highs again in the short and medium term.
Chip structure: BTC inventory on exchanges continues to decline
During the decline from March to April, long-term BTC investors once again started to increase their holdings, which objectively played a balancing role in reducing market selling pressure.
Long and short position structure (month)
By the end of May, the scale of long-term holdings reached 14.4199 million coins, near the historical high. Correspondingly, the inventory scale of centralized exchanges continued to decline, and currently there are only 2.9882 million coins left, close to the level at the end of November 2020.
In previous cycles, when liquidity surged, long-handers chose to sell, which objectively curbed price increases. However, when prices fell during the cycle, long-handers would slow down their selling or even turn to increasing their holdings, and this cycle is no exception.
The difference from the previous cycle is that the secondary selling of long-handed investors in the past would end the bull market, but after this round of secondary selling, the market chose to continue to move upward. We understand this as the addition of Strategy-type institutions to the long-handed structure, which has triggered changes in market trends. Whether this change is permanent or temporary requires close attention.
Conclusion
Although we are optimistic about the expansion of BTCs use cases and long-term trends based on long-termism, the strength of BTC prices and the sharpness of its trends in the short term still exceed our most optimistic estimates.
The reason is the over-optimism of risk markets including the US stock market, and the investment and speculation boom triggered by the huge expansion of BTC use cases in the United States. We are confident about the latter, but we think that the US stock market and the BTC market are too optimistic about the pricing of the equal tariff war, and there will inevitably be many twists and turns in the middle. In addition, we have lowered our expectations for the Feds interest rate.
In the March report, we expected BTC to reverse in the summer, but the market reaction was beyond our expectations, reaching a new high in May. Considering many uncertainties and delayed liquidity expectations, we believe that BTC will most likely fluctuate with the US stock market in the next two months, and it is unlikely to reach a new high and then reach a new price level.
If everything goes well, taking another step forward should be the story of the third quarter!
EMC Labs
EMC Labs was founded by crypto asset investors and data scientists in April 2023. It focuses on blockchain industry research and Crypto secondary market investment, takes industry foresight, insight and data mining as its core competitiveness, and is committed to participating in the booming blockchain industry through research and investment, and promoting blockchain and crypto assets to bring benefits to mankind.
For more information, please visit: https://www.emc.fund
