On May 19, Bitcoin's attempt to hit a historical high of 109,600 failed, leading to a rapid decline of nearly 5%, causing about 800 million dollars in long liquidations, and market bullish sentiment plummeted instantly. From a trading perspective, there are two main reasons for the rapid cooling of bullish sentiment: First, when Bitcoin attempted to break 109,600, there was a clear divergence between price and volume, coupled with a MACD bearish crossover at high levels, indicating a clear inducement for bulls; second, the cumulative increase of Bitcoin's rebound has reached 45%, and with the gradual realization of benefits from the tariff war, the willingness to take profits has significantly increased. Some market participants even worry that 107,100 and 109,600 have formed a historical double top structure.
Despite the phase adjustment pressure facing Bitcoin, under the dual support of institutional consensus strengthening and macro-positive resonance, the market is more likely to complete a mild adjustment by trading time for space. Even if there is a demand for leverage cleaning, it is expected to only release pressure through quick 'spike' actions during trading, with a low probability of sustained deep corrections.
First, since November 2024, the balance of Bitcoin on exchanges has shown a rapid decline. According to Coinglass data, Bitcoin's exchange balance dropped from 2.44 million coins on November 6, 2024, to 2.15 million coins on May 21, 2025, a decrease of 290,000 coins over six months. If this trend continues, the available supply on centralized exchanges could drop below 1.5 million coins by early 2026, further exacerbating market supply constraints.
In fact, the pace of Bitcoin's demand expansion may far exceed expectations. Since April 2025, 21 institutional entities have announced plans to incorporate Bitcoin into their balance sheets or transition into Bitcoin financial companies, nearly matching the total from the first quarter. This includes significant market players like Twenty One, Strive Asset Management, and Nakamoto. Notably, this trend is accelerating into Asia — for example, the Indonesian fintech company DigiAsia Corp recently announced plans to raise 100 million dollars for Bitcoin investments.
Among the many institutions investing in Bitcoin, Twenty One is particularly noteworthy, as it could become the future 'super gold-consuming beast'. The company is jointly invested by Tether, Bitfinex, and SoftBank and achieved a reverse merger with Cantor Equity Partners for a public listing. Currently, Twenty One holds 42,000 Bitcoins (approximately 4.5 billion dollars) and plans to further raise 1.17 billion dollars for additional purchases, demonstrating a strong market expansion ambition.
Historical experience shows that once a market consensus trend forms, it often has strong inertia — unless there is sufficient bullish release, it is difficult to reverse. For example, during the gold rush crisis in April, the New York vault saw an outflow of 3 million ounces of gold in a single month, completely igniting market FOMO sentiment and pushing gold prices into a main surge wave. Therefore, I believe that before the Bitcoin market rally ends, there will certainly be a tense liquidity sell-off and a main surge wave.
Second, the disturbance caused by the U.S. debt crisis may be very short-lived and could even become a catalyst for a new round of Bitcoin increases in the medium to long term. Following Moody's downgrade of the U.S. sovereign credit rating, U.S. bonds faced a fierce sell-off, with the 30-year bond yield soaring to 5%. More critically, in June, the U.S. will face a 'new borrowing to repay old debts' pressure of up to 6.5 trillion dollars, which could further intensify the bond sell-off. Looking back to April, it was the severe volatility in the bond market that put hundreds of billions of basis arbitrage funds at risk, leading to a chain reaction in the U.S. stock and crypto markets.
However, during the window period when liquidity in U.S. bonds shows cracks, the Federal Reserve quietly completed the purchase of 43.6 billion dollars of U.S. bonds, with the Fed purchasing 8.8 billion dollars of 30-year bonds on May 8 alone. Although the Fed claims that this operation is merely reinvesting the proceeds from maturing bonds to avoid rapid contraction of the balance sheet, assets sensitive to liquidity such as Ethereum, altcoins, and the Russell 2000 have seen continuous increases around May 8. This indicates that smart money in the market has already keenly sensed that the bond crisis will force the 'stubborn' Federal Reserve to become 'honest'.
Recent forward-looking research from JPMorgan holds the same view, with its latest model indicating that to alleviate debt pressure, the Federal Reserve may cut rates more than seven times in 2026, at which point the S&P 500 index could reach 6500 points. The current market has entered an atypical cycle, and 'going long on U.S. assets (excluding the dollar)' has become the consensus among institutions.
Under the dual impact of the U.S. debt crisis and the tariff war, bearish sentiment towards the dollar in the foreign exchange options market has soared to historical extremes. The Bloomberg Dollar Spot Index's one-year risk reversal indicator has fallen to -27 basis points, marking the lowest level recorded since 2011, even more pessimistic than during the initial market turmoil at the onset of the pandemic. This extreme data indicates that U.S. authorities are facing a difficult choice — to maintain stability in the bond market, stock market, and even the overall economy, a moderate sacrifice of the dollar's exchange rate stability may have become an unavoidable cost. (From 2020 to 2024, the yen depreciated by 54%, but the Nikkei rose by 140%, indicating a recovery in Japanese manufacturing and consumption.) This is also why both the federal and state governments in the U.S. are promoting Bitcoin as a strategic reserve.
In summary, operationally, until we see the main surge wave in Bitcoin, every decline presents a buying opportunity. Additionally, during the window period of improving marginal liquidity, altcoins are likely to perform well, and strategically increasing holdings of some leading altcoins can amplify portfolio returns.
