The market, project, and cryptocurrency information, opinions and judgments mentioned in this report are for reference only and do not constitute any investment advice.
In the December 2024 report, EMC Labs pointed out that the global economy is still in a rate-cutting cycle, and the current cooling is only a temporary setback. As liquidity gradually recovers, BTC will once again challenge the $100,000 mark after a high-level adjustment.
In January 2025, the Federal Reserve paused rate cuts as scheduled, but BTC still reached the $100,000 mark as judged in the December report, driven by medium- and long-term liquidity and optimistic sentiment, closing at $102,411.26 and reaching a new high of $109,358.01 in the middle of the month.
Coinciding with Trump's inauguration on January 20, the world welcomed the most crypto-friendly US president. He issued a series of crypto-friendly measures and unexpectedly issued his own MEME coin. Meanwhile, the "BTC Strategic Reserve" proposal is being actively discussed and progressed in multiple US states.
These measures and progress have greatly stimulated market sentiment, driving over $16.4 billion to flow into the crypto market in January, resulting in a remarkable 9.7% increase in BTC in the first month of 2025, far outperforming the Nasdaq and gold in the same period.
From the perspective of BTC's 4-year halving cycle and global monetary macroeconomic liquidity, BTC is still in the upward phase (i.e., bull market) of EMC Labs' major cycle model.
The market has completed the adjustment of the Fed's rate cut expectation from "4 to 2" and the pricing of the yen rate hike, and has maintained a relatively healthy trend. From February, the factors affecting the medium-term price performance will shift to whether Trump's economic policies will lead to inflation, causing the Fed's rate cut expectations to continue to be lowered or even raised. However, the market has not fully priced in the volatility that may be caused by Trump's tariff policy, and the high-level stock market and BTC are inevitably facing short-term price fluctuations.
Macro Finance: Crypto Assets Officially Accepted by the US Government
With the release of the December CPI and non-farm payroll data in January, the judgment that the US economy is not "landing" has become clearer.
December CPI rose 2.9% year-on-year, in line with market expectations, compared to 2.7% previously; core CPI rose 3.2% year-on-year, slightly lower than the market expectation of 3.3%, compared to 3.3% previously. December PCE rose 2.5% year-on-year, compared to 2.4% previously; core PCE rose 2.8% year-on-year, unchanged from the previous value. December non-farm payrolls increased by 256,000, far exceeding the market expectation of 165,000; the unemployment rate fell to 4.1%, lower than the expected 4.2%.
The persistence of inflation data and the continued strength of employment data have made it inevitable for the Fed to stop cutting rates at the end of January.
As this result had already been priced in by the market, although the stock market, gold, and BTC experienced violent fluctuations in the middle of the month, they all ultimately recorded increases. The Nasdaq, Dow Jones, and S&P 500 recorded monthly gains of 1.64%, 4.7%, and 2.7%, respectively. London gold closed at a record high of $2,801 per ounce. BTC rose 9.7% for the month, reaching a new all-time high of $109,358.01 during trading.
After three consecutive months of strong gains, the rise in the US dollar index finally slowed, up 0.3363% for the month, still at the high level of 108.5160, putting continued pressure on non-US dollar-denominated assets. Both long-term and short-term US bond yields slowed their gains, consolidating at high levels, with yields rising slightly to 4.543% and 4.155%, respectively.
After the necessary chaos, major asset classes have completed the pricing of the downward adjustment of rate cut expectations. The next step in trading will revolve around Trump's economic policies, with tariffs being the most important factor.
On February 1, the US imposed a 25% tariff on Canada and Mexico, its two major trading partners, and a 10% tariff on China, and said it would also take action against the EU. After the news was confirmed, the three major stock indexes and BTC all recorded significant declines on the last trading day of January.
After being sworn in, Trump began to fulfill his promises to the Crypto community. On the 23rd, a Digital Asset Markets Working Group was established, which will submit a report to the President within 180 days of the executive order being issued. The report will include: a federal regulatory framework for the issuance and operation of US digital assets, including stablecoins, considering market structure, oversight, consumer protection and risk management provisions, and an assessment of the feasibility and standards for establishing and maintaining a national digital asset reserve.
The establishment of this working group marks the formal adoption of crypto assets at the highest level in the US, and the specific policies to be issued will have a profound impact on the digital asset market in the US and globally.
In addition, for BTC, there is a more specific long-term positive policy, namely the "BTC Reserve Act". 15 US states, including Pennsylvania, Oklahoma, and Ohio, are discussing or promoting the "Bitcoin Reserve Act", which aims to include Bitcoin in state-level strategic reserves to hedge against inflation and promote fiscal stability. The plans in Arizona and Utah have already reached the White House and Senate approval stage, just one step away from becoming law.
The advancement of the reserve act will undoubtedly provide strong confidence support for BTC holders and bring new long-term buying power to the market.
Crypto Assets: Waiting for a Breakthrough of the New Box
In January, BTC opened at $93,347.59 and closed at $102,411.26, up 9.7%, with a range of 21.78% and a new all-time high of $109,358.01 during trading. Trading volume decreased slightly from the previous month.
BTC Price Trend (Daily)
Technically, BTC prices have formed a box structure ranging from $89,000 to $110,000 since early November (the purple area in the chart), which can be called the "Trump Bottom". This range was established around Trump's inauguration and can be seen as the market's pricing of Trump's crypto-friendly policies.
Based on the second upward trend line (the blue dotted line in the chart) established on the expectation and announcement of Trump's victory, the line also provided support for BTC prices on January 13 and 27. The second upward trend line and the upper bound of the $89,000 to $110,000 box are about to intersect, forcing the market to make a short-term directional choice.
In terms of trading volume, it has been declining since the high point on January 20, Trump's inauguration day, indicating a cautious attitude from the market towards the high-level BTC. The decline in liquidity will inevitably weaken BTC's short-term performance.
From a technical indicator perspective, the short-term outlook is not optimistic, with a high probability of downward pricing. However, the market structure has been changing in this cycle, with more upward pricing driven by the large funds behind Microstrategy and BTC ETFs. Therefore, it is more effective to track the dynamics and medium-to-long-term actions of this part of the capital.
Capital: Inflow Reached $16.4 Billion
Since the Trump rally started in November, new capital inflows have continued to be the main force supporting the rise in BTC prices by absorbing long and short positions.
This month, capital inflows continued the trend since November, reaching $16.406 billion.
eMerge Engine Crypto Market Capital Inflow Statistics (Monthly)
Among the 31 trading days, there were only 9 days of net outflows, which is consistent with the number of BTC's down days (11 days) this month. This reflects the long-term trend of increased risk appetite and the pursuit of risky assets due to ample liquidity after the global economy entered a rate-cutting cycle, as well as the gradual increase in BTC adoption driven by US policies.
However, it is necessary to be vigilant, as after the strong inflow, accompanied by the impact of tariff uncertainty, once the capital inflow slows down, the price of BTC may face a short-term violent adjustment.
Second Sell-off: The New Range Sell-off is Gradually Slowing Down
After BTC broke through the "new high consolidation range" in October, long-term BTC investors have started the second round of sell-offs in this cycle. According to historical patterns, the second round of sell-offs by long-term holders will continue as liquidity is injected and prices rise, until the liquidity is exhausted, leading to the end of the bull market and a cyclical price decline.
BTC Long-term Holders, Short-term Holders, Miners and Exchange Balances (Monthly)
Currently, the sell-off is still ongoing, although the scale of the sell-off is massive, it has not yet reached the point of exhausting liquidity. In fact, since November, the sell-off volume has been decreasing monthly, and the exchange balances have also been continuously declining.
BTC Sell-off and Exchange Balance Changes (Monthly)
Most of the sell-offs so far have occurred above $90,000, i.e., after November. This has resulted in a BTC volume of 4,138,554.23 coins in the $89,000 ~ $110,000 range, accounting for 24.22% of the total supply.
This portion of the coins has formed a new bottom, which can be called the "Trump Bottom". The core buying volume at this stage comes from institutional investors who entered through the Microstrategy and Blackrock BTC ETF channels after Trump's election victory.
EMC Labs believes the "Trump Bottom" is solid enough, and as the sell-off by long-term holders in the $89,000 ~ $110,000 range slows down, the upward momentum of BTC in the medium to long term is much greater than the downward force. However, in the short term, it may face the heavy pressure of panic caused by tariffs, with a small probability of falling below, depending on the liquidity of the funds.
Conclusion
With the introduction and gradual implementation of crypto-friendly policies in the US, crypto assets represented by BTC are moving from the periphery to the center stage, ushering in a new stage of development.
New holders are entering the BTC market, replacing the original holders at a higher purchase price or at the cost of floating losses caused by market turmoil. The motivation of the new investors comes from the new use case scenarios of BTC (corporate allocation, state government reserves, and even federal government reserves). These new use cases have led to a re-evaluation of the value and price of BTC, and the control of the price may also undergo fundamental changes.
In the medium term, from the perspectives of internal holding structure, external capital supply, and investor sentiment, BTC has basically completed the forging of the "Trump Bottom" and is ready to break through to the next price range.
The biggest external uncertainty comes from the chain reaction formed by the interest rate cut expectations and capital supply after the implementation of Trump's economic policies. Once the liquidity is constrained, the volatility will rise significantly.
EMC Labs (Emerging Crypto Lab) was founded in April 2023 by crypto asset investors and data scientists. It focuses on blockchain industry research and Crypto secondary market investment, with industry foresight, insight, and data mining as its core competencies, committed to participating in the thriving blockchain industry through research and investment, and promoting blockchain and crypto assets to bring welfare to humanity.
For more information, please visit: https://www.emc.fund
