In May 2025, the price of Bitcoin (BTC) surged like a runaway horse, reaching a nearly two-month high of $97,900 before briefly pausing near $94,000 and quickly rising back to around $97,000. This price frenzy ignited passion in the crypto market and prompted investors to ask: What is driving this wave of increase? Is it Trump's high-profile trade declaration, or the Federal Reserve's monetary policy direction? Or is it the accelerated embrace of crypto assets by Wall Street giants? The answer may lie in the interplay of all three. This article will narrate how recent news has sparked the flame of Bitcoin, delve into the intricate pulses of on-chain data, and look forward to the opportunities and concerns in the market, striving to be both engaging and professionally deep.
Trump's trade gamble: The igniter of market sentiment
On May 8, Trump announced that he would make a significant statement in the Oval Office the following morning regarding a trade agreement with 'a respected major power.' (New York Times) The mystery was soon unveiled: the agreement was with the UK. This news acted like a spark, quickly igniting market speculation. Trump's trade policies have always been a barometer for global financial markets, and this time was no exception. He also previewed that he would announce 'very significant news' before his trip to the Middle East next week, further teasing investors' nerves.
Trump's trade actions have repeatedly stirred waves in 2025. At the beginning of April, when he announced a 145% tariff on China, the price of Bitcoin fell to $77,730, and global stock markets faced their most severe turbulence since 2020. However, on April 10, he unexpectedly suspended some tariffs for 90 days, swiftly reversing market sentiment, with Bitcoin surging 7% in a single day to $82,350. Now, the trade agreement with the UK is seen as a potential positive, possibly easing global trade frictions and boosting the appeal of risk assets. JPMorgan strategist Bram Kaplan keenly captured this trend, advising investors to buy S&P 500 call options, stating that Trump's announcement could drive up the market. This wave of optimism quickly spread to the crypto realm, followed by a surge in capital inflows.
The Federal Reserve's delicate chess game: The catalyst of rate cut expectations
On the same day, Federal Reserve Chairman Jerome Powell dropped a heavyweight signal at a press conference: the monetary policy outlook may include rate cuts, but the specific path will anchor on economic data. He downplayed the significance of GDP fluctuations, emphasizing that the Federal Reserve will remain flexible. This statement injected a warm note into the market, as rate cuts are often seen as a spring breeze for risk assets.
In 2025, the Federal Reserve's policies have a particularly significant impact on Bitcoin. On April 23, Trump denied rumors of firing Powell, and the market breathed a sigh of relief, causing Bitcoin to rebound. However, the tariff shock at the beginning of April had previously driven Bitcoin down to a low of $81,500, highlighting the macro environment's pull on the crypto market. Expectations of rate cuts indirectly fuel Bitcoin's rise by lowering market liquidity costs, weakening the dollar's appeal, and enhancing inflation hedging demand.
But Powell's cautious language also plants seeds of concern. He clearly stated that policies will closely monitor economic data, and if inflation or employment data exceed expectations, rate cuts may be delayed. The market is in a delicate balance, where subtle changes in external variables could trigger significant volatility.
Wall Street's crypto ambitions: The surge of institutional capital
On May 1, Morgan Stanley announced plans to launch crypto trading services on the E*Trade platform in 2026, marking a new stage in Wall Street's embrace of digital assets. Previously, its affluent clients could invest in crypto assets via Bitcoin ETFs and futures, with advisors allowed to promote ETFs since August 2024. Institutions like Charles Schwab are also following suit with similar services. These actions pushed Bitcoin to briefly surpass $97,000 on May 2.
The influx of institutional capital is reshaping the market ecosystem. The U.S. spot Bitcoin ETF has absorbed $4.6 billion over the past two weeks, nearing a historic high of 1.171 million BTC in assets under management. In contrast, the continuous outflow from March to April had put pressure on the market, highlighting institutional capital's sensitivity to the macro environment. Institutional participation not only enhances market liquidity but also paves the way for Bitcoin's mainstream adoption. However, in mid-April, influenced by tariff turmoil, the Bitcoin ETF saw a continuous outflow of about $1 million over seven days, reminding investors that institutional capital is not a monolith.
On-chain data: A delicate portrayal of the market's pulse
On-chain data provides us with a window to glimpse the internal dynamics of the Bitcoin market. Recent price recoveries have triggered a series of significant changes, revealing the intricate evolution of investor behavior and market structure.
First, Bitcoin's realized capitalization has surged to a record high of $889 billion, growing 2.1% over the past month. This metric measures the cumulative net capital inflow, reflecting strong momentum in fund inflows. The net realized profit/loss indicator further shows that net capital inflows have exceeded $1 billion daily in recent weeks, indicating buyers' willingness to absorb sell orders at current prices, demonstrating robust demand. In contrast, realized losses only account for 1-2% of total trading volume, suggesting that most investors who bought at high prices are still holding back, with market sentiment leaning towards optimism.
Secondly, the price recovery significantly alleviated investors' financial pressure. At the recent low of $74,000, over 5 million BTC were in a state of unrealized loss. As the price rebounded to $97,000, about 3 million BTC returned to profitability, especially the portfolios of short-term holders (STH) were restored. The unrealized loss indicator shows that the financial pressure on short-term holders has fallen back to neutral levels from the +2σ high during the August yen arbitrage trade collapse and the market slump in early 2025. This improvement is directly reflected in trading behavior: the proportion of profitable trades among short-term holders surged, marking a turning point from loss-driven to profit-driven market dynamics.
Additionally, the behavior of long-term holders (LTH) is also worth noting. Since the low point, over 254,000 BTC have been held for more than 155 days, showing long-term investors' confidence in the current price. The realized supply density indicator further reveals that a large amount of BTC with similar cost bases is clustered near the current price. These coins were primarily accumulated between December 2024 and February 2025 and have not been sold despite undergoing the recent low point's test. The existence of this supply increases the market's sensitivity to price fluctuations, as small changes could trigger large-scale trades.
Finally, the options market provides an external perspective on volatility. The 1-week and 1-month ATM implied volatility has fallen to its lowest level since July 2024, reflecting investors' underestimation of future volatility. Historically, low volatility often heralds the arrival of high volatility periods, and combined with high on-chain supply density, the market may be brewing a storm.
Market inflection point: Concerns beneath the excitement
The upward momentum of Bitcoin is in full swing, but the market stands at a delicate inflection point. Prices hover near the short-term holder cost base (around $95,000), a level that has historically served as a litmus test for upward trends. If this support can be maintained, the market may advance further; if it breaks down, recent momentum could falter.
Signals from on-chain and options markets further exacerbate this uncertainty. High supply density means increased market sensitivity to price fluctuations, while low implied volatility suggests that investors may be underestimating future volatility risks. External catalysts—such as Trump's trip to the Middle East or the Federal Reserve's interpretations of economic data—could spark volatility.
Epilogue: The opportunities and fog of Bitcoin
The Bitcoin market in 2025 resembles a drama filled with peaks and troughs. Trump's trade policies inject vitality into risk assets, expectations of rate cuts by the Federal Reserve ignite market imagination, and Wall Street's crypto positioning endorses Bitcoin's long-term value. On-chain data delicately outlines the picture of capital inflows, the restoration of investor confidence, and heightened market sensitivity.
However, beneath the excitement lies a fog. The market is at a critical juncture, where subtle changes in external variables could disrupt the fragile balance. Trump's next move, the Federal Reserve's policy path, and the flow of institutional capital will be key clues in the short term. In the long run, Bitcoin's decentralized nature and scarcity remain its core appeal, but uncertainties in the macro economy, regulatory pressures, and competition from traditional safe-haven assets may pose challenges.
For investors, this is a moment filled with both opportunities and risks. A saying from an on-chain analyst may be worth pondering: 'The value of Bitcoin lies in the sovereignty it grants to individuals, rather than temporary price fluctuations.' In this digital tide, rationality and patience will be the best compass. Regardless of how the market fluctuates, maintaining clear judgment may lead to longer-term success more than chasing trends.
