Bitcoin breaks through $100,000 with ETF inflows of 2.8 billion, beware of structural risks

Market Fluctuation Intensifies, Structural Risks Emerge, May Enter High-Position Shock Period

Moderate macro environment: Credit rating downgrades, tariff and tax reduction policies trigger fluctuations, market risk aversion sentiment rises, and gold prices soar.

Capital momentum: The inflow of stablecoins and ETF funds is strong, with new buying activity being active, but the market's risk aversion sentiment is rising, and its sustainability remains to be observed.

Price and fundamentals diverge: Bitcoin rises, with funds, over-the-counter premiums, and ETFs heating up simultaneously, increasing the risk of a pullback.

Investment advice: Adopt a defensive strategy, focus on the Bitcoin support level of $103,000, and pay attention to the price trends of Ethereum and Solana against Bitcoin.

1. Macroeconomic Environment and Market Situation

The downgrade in credit ratings, along with tariff and tax reduction policies, has pushed up U.S. bond yields, triggering fluctuations in the stock and cryptocurrency markets.

U.S. stocks may face a pullback, with technology stocks under pressure, while the financial and defense sectors are relatively resilient; cryptocurrencies may drop towards support levels, and attention should be paid to signals of monetary policy easing.

Fiscal stimulus and interest rate cuts are beneficial for the stock market and cryptocurrencies, but one should be wary of the expanding deficit and the risks to the dollar's status.

If the monetary policy shifts to easing and the dollar's position remains stable, the market will continue to rise; otherwise, it is necessary to increase the allocation of non-dollar assets.

Strategy: Increase holdings in mainstream cryptocurrencies and dynamically adjust global asset allocation.

2. Analysis of Capital Flow and Main Cryptocurrency Market Structure

External Capital Flow

• ETF Funds: This week saw an inflow of $2.8 billion, with a significant increase in inflow.
• Stablecoin: This week issued an additional $2.3 billion, with an average daily issuance of $321 million, which is a relatively high issuance level.

Market Sentiment Indicator

• OTC Premium: Stablecoin premium continues to rise

Bitcoin (BTC)

• Technical aspect: The market is in a fluctuating upward range.
• On-chain chip distribution: Chips above $103,000 are enhanced.

Ethereum (ETH)

Underperformed compared to Bitcoin, the ETH/BTC ratio remains volatile, and funds continue to flow back to Bitcoin dominance.

On-chain fluctuations: The increase in active addresses may indicate the completion of a phase of bottoming.

Macroeconomic Review

Impact of Credit Rating Downgrade on the Market

Background:

On May 16, 2025, a rating agency downgraded the United States' credit rating from Aaa to Aa1, citing a surge in debt levels (36 trillion USD, accounting for 122% of GDP) and high interest expenses (accounting for 3% of GDP). This marks the loss of the highest credit rating for the United States following downgrades by other rating agencies in 2011 and 2023. The downgrade, along with tariffs and tax reduction measures (expected to increase the deficit by 3.3 trillion USD), will exacerbate fluctuations in the U.S. Treasury market in the short term.

Historical Review:

• 2011: Risk aversion heightened demand for US Treasuries, with the 10-year yield falling to 1.7%.
• 2023: Increased bond issuance led to selling pressure, and the yield rose to 4.9%, followed by fluctuations.
• 2025: Like 2023, downgrades and policy uncertainty push up yields (30-year has already broken 5%), with continued short-term selling pressure.

Supply Side:

• Expiration pressure is low: The peak of US Treasury maturities from May to June mostly consists of short-term Treasury bills (accounting for 80%), with a 4% yield attracting buyers, and the extension risk is small.
• Debt issuance pressure is high: New policies will expand debt issuance, increase supply, and yields may rise further.

Demand Side:

• Short term: The shift in monetary policy towards easing (each 25 basis points cut saves about $90 billion in interest) and stopping balance sheet reduction can boost demand and lower yields.
• Long-term: The demand for US Treasuries relies on the status of the US dollar, which needs to be maintained to ensure rigid buying.

Impact on Stock Market and Cryptocurrency

Short-term Impact (until July 2025)

1. Stock Market

• Market Fluctuation Intensifies: The downgrade of credit ratings exacerbates market concerns about fiscal sustainability, combined with the uncertainty of tariff policies and tax reduction bills, which may trigger a rise in risk aversion. The increase in the debt ceiling has led to a rise in the supply of U.S. Treasuries, pushing yields higher (with the 30-year yield breaking 5%), increasing corporate financing costs.
• Sector Divergence:

Pressure sectors: Technology stocks and high-valuation growth stocks are sensitive to interest rates, and rising yields will suppress valuations (such as major tech stocks with high price-to-earnings ratios). Consumer goods and retail may be under pressure due to tariffs raising costs.

Beneficiary sectors: The financial sector (such as banks and insurance companies) benefits from a high interest rate environment, while the defense and energy sectors may perform strongly due to increased spending from new policies.

• Policy signals: If signals for interest rate cuts or halting balance sheet reduction are released in July, it may alleviate market pressure and boost the stock market, especially small and mid-cap stocks.

Strategy:

• Reduce holdings in overvalued technology stocks and focus on the financial, defense, and energy sectors.
• Pay close attention to signals from monetary policy and prepare to seize rebound opportunities under expectations of interest rate cuts.
• Allocate defensive assets (such as consumer staples ETFs or gold) to hedge against fluctuation.

2. Cryptocurrency

• Interest Rate Pressure: The rise in US Treasury yields reduces the attractiveness of non-yielding assets (such as cryptocurrencies), and funds may flow towards high-yield Treasury bills (4% yield).
• Potential benefits: If July hints at an interest rate cut, the crypto market may rebound in advance, as easing expectations are favorable for risk assets. Decentralized finance (DeFi) projects may attract some funds due to safe-haven demand.

Strategy:

• If the monetary policy signals a loosening, consider increasing holdings of mainstream cryptocurrencies or DeFi tokens.

II. Long-term Impact (After 2025)

1. Stock Market

• Policy-driven: The new policy's $3.8 trillion tax cut and $200 billion defense/border spending will stimulate economic growth, benefiting the overall performance of the stock market. If tariff revenues (estimated at $2.7 trillion) effectively offset the deficit, market concerns about fiscal deterioration will ease, supporting the continuation of the bull market.
• Interest Rates and Valuation: A shift towards loose monetary policy can reduce corporate financing costs and boost high-growth sectors (such as technology and clean energy). However, if the deficit continues to expand and high interest rates are maintained, valuation pressure will limit the upside potential.
• Impact of the Dollar's Status: The long-term performance of the stock market relies on the international status of the dollar. If the dollar's status remains stable (through current account output and financial account recovery), foreign capital inflows will support the stock market; if the dollar's status wavers, capital outflows may drag the market.

2. Cryptocurrency

• Loose policy benefits: If monetary policy continues to shift towards looseness and stops the tapering, increased liquidity will drive up cryptocurrency prices, similar to the bull market of 2020-2021 (Bitcoin rose from 10,000 to 69,000). In the long term, Bitcoin may break through 150,000.
• Regulation and Adoption: A friendly government attitude towards crypto (such as supporting Bitcoin reserves) may drive institutional adoption, benefiting the market. However, if a fiscal deterioration leads to a crisis of confidence in the dollar, cryptocurrencies may attract capital inflows as a safe-haven asset.
• Risk Factors: If the monetary policy is delayed in shifting or the status of the US dollar is challenged, the cryptocurrency market may experience intensified fluctuations due to a decline in risk appetite.

Strategy:

• Hold mainstream cryptocurrencies for the long term and pay attention to on-chain data (such as active addresses and transaction volume) to determine trends.
• Diversify investments into potential projects (such as Layer 2 solutions, Web3) to avoid single asset risk.
• If the status of the US dollar is shaken, increase Bitcoin allocation as a hedge.

II. On-chain Data Analysis

1. Short-term market data changes affecting the market this week

1.1 Stablecoin Fund Flow Situation

This week (from May 16 to May 26), the total amount of stablecoins slightly increased to 213.596 billion, with an issuance of 2.34 billion, showing a significant recovery compared to the previous period. The recovery period mainly comes from the second half of this week. In relation to the total amount of stablecoins (213.596 billion), 2.34 billion is approximately a 1.1% increase, which is considered a relatively significant recovery. For altcoins, this is a positive marginal change. The increase in issuance means that more "purchasing power ready to be投入加密市场" is being minted.

1.2 ETF Capital Flow Situation

This week, there has been a large inflow into Bitcoin ETFs, with an inflow of $2.8 billion, which is a strong signal of funds indicating that institutional investors are becoming bullish on Bitcoin again. The second to last column shows our estimate of the number of Bitcoins that the ETF may purchase; of course, this data is not accurate, just an estimate. Although it is slightly lower than the 33,462 coins from the week of 4/21, it is significantly higher than the previous weeks (especially last week's 5,849 coins), indicating substantial buying, and the price trend is consistent with the flow of funds.

1.3 Off-exchange Premium/Discount

This week, the over-the-counter premium of major stablecoins has slightly rebounded, returning to the 100% level, indicating a renewed demand for stablecoins in the market. Combined with stablecoin data, not only are on-chain data showing optimistic performance, but there is also a slight warming trend in over-the-counter capital inflows.

1.4 Institutional Purchase

In the chart, during this round of increase (starting from April 14), an organization purchased 48,045 Bitcoin, spending approximately $4.5469 billion. By combining the stablecoin data and ETF data mentioned above, we can see that this organization's purchases have become an important funding channel for this round of increase. Moreover, the frequency of purchases since the relatively high point last year has significantly increased compared to 2023-2024. Currently, the organization's cost has risen to $69,726, close to the low point in April. From an analytical perspective, this organization has become an important force influencing the market, and there is a need to strengthen relevant data monitoring in the future.

1.5 Exchange Balance

In the second half of this round of price increases, when the price was at 95000, the market saw both Bitcoin and Ethereum being continuously withdrawn from exchanges, indicating that investors were unwilling to sell. Especially for Ethereum, after a short squeeze rise (to 2500), funds quickly withdrew from exchanges, releasing a strong "lock-up intention," showing that investors were regaining confidence, which is actually an important force supporting the latter half of this round of price increases. However, it is important to note that currently, the speed of balance reduction has slowed down, and we should closely monitor whether the liquidity of exchanges will continue to be squeezed.

2. Changes in mid-term market data affecting the market this week

2.1 Holding Address Holding Ratio and URPD

The change in the holding proportion of addresses holding coins this week is not particularly large, especially the addresses in the 100-1K range have not continued to significantly increase their holdings. The URPD shows a relatively healthy columnar structure, and from these two data points, there is no indication of any unusual activity.

On the data level, the funding situation and on-chain data this week have actually performed well, coupled with a relatively smooth K-line trend. Overall, this phase is still characterized as a strong state (unless there is a destructive adjustment next week). Even if there is an adjustment next week, it cannot be presumptively assumed how deep it will definitely adjust.

![Market Observation Weekly: Macroeconomic Disturbances Intensify Fluctuation, Funding Frenzy Cannot Hide Structural Risks](