In May 2025, Bitcoin (BTC) price surged like an unbridled wild horse, briefly reaching a two-month high of $97,900, then pausing around $94,000 before quickly rebounding to around $97,000. This price frenzy ignited the passion of the crypto market and prompted investors to ask: What is driving this rally? Is it Trump's high-profile trade declaration, the Federal Reserve's monetary policy direction, or Wall Street's accelerating embrace of crypto assets? The answer may be an interweaving of all three. This article will narratively explore how recent news has sparked Bitcoin's fire, delve into the nuanced pulse of on-chain data, and examine market opportunities and concerns, striving to be both captivating and professionally in-depth.
Trump's Trade Gamble: A Market Sentiment Igniter
On May 8th, Trump announced a major statement to be released the next morning in the Oval Office regarding a trade agreement with "a highly respected great nation". The New York Times later revealed the counterpart was the United Kingdom. This news sparked market speculation like a sudden spark. Trump's trade policy has always been a barometer for global financial markets, and this instance was no exception. He also previewed a "very significant announcement" before his Middle East trip next week, further teasing investors' nerves.
Trump's trade moves have created waves in 2025. In early April, when he announced 145% tariffs on China, Bitcoin price dropped to $77,730, and global stocks experienced the most intense volatility since 2020. However, on April 10th, he unexpectedly suspended some tariffs for 90 days, and market sentiment quickly reversed, with Bitcoin surging 7% to $82,350 in a single day. Now, the trade agreement with the UK is seen as a potential positive, possibly alleviating global trade friction and enhancing risk assets' attractiveness. JPMorgan strategist Bram Kaplan keenly captured this trend, advising investors to buy S&P 500 call options, suggesting Trump's announcement could boost the market. This optimistic sentiment quickly spread to the crypto realm, triggering a wave of capital inflows.
The Federal Reserve's Subtle Chessboard: A Catalyst for Rate Cut Expectations
On the same day, Federal Reserve Chairman Jerome Powell dropped a significant signal at the press conference: monetary policy prospects might include rate cuts, but the specific path would be anchored to economic data. He downplayed GDP fluctuations, emphasizing the Fed's flexibility. This statement injected warmth into the market, as rate cuts are often seen as a tailwind for risk assets.
In 2025, the Fed's policy has been particularly significant for Bitcoin. On April 23rd, Trump denied rumors of firing Powell, and the market breathed a sigh of relief, with Bitcoin rebounding immediately. However, the tariff impact in early April had pushed Bitcoin to a low of $81,500, highlighting the macro environment's pull on the crypto market. Rate cut expectations indirectly fuel Bitcoin's rally by reducing market liquidity costs, weakening the dollar's appeal, and enhancing inflation hedging demand.
However, Powell's cautious wording also laid a subtle groundwork. He clearly stated that policy would closely track economic data, and rate cuts could be delayed if inflation or employment data exceeded expectations. The market is at a delicate balance, where minor external variations could trigger dramatic fluctuations.
Wall Street's Crypto Ambitions: Institutional Fund Movements
On May 1st, Morgan Stanley announced plans to launch crypto trading services on E*Trade in 2026, marking a new phase of Wall Street's digital asset embrace. Previously, wealthy clients could invest in crypto assets through Bitcoin ETFs and futures, with advisors permitted to promote ETFs since August 2024. Charles Schwab and other institutions are following suit with similar service plans. These moves pushed Bitcoin to briefly break $97,000 on May 2nd.
Institutional fund inflows are reshaping market ecology. US spot Bitcoin ETFs have absorbed $4.6 billion in the past two weeks, approaching the historical high of 1.171 million BTC in assets under management. In contrast, continuous outflows from March to April had previously pressured the market, highlighting institutional funds' sensitivity to the macro environment. Institutional participation not only enhances market liquidity but also paves the way for Bitcoin's mainstreaming. However, in mid-April, affected by tariff turbulence, Bitcoin ETFs experienced consecutive 7-day outflows of about $1 million, reminding investors that institutional funds are not monolithic.
On-Chain Data: A Delicate Portrayal of Market Pulse
On-chain data provides a window into Bitcoin market's internal dynamics. Recent price recovery has triggered significant changes, revealing subtle evolutions in investor behavior and market structure.
First, Bitcoin's Realized Cap rose to a historical high of $88.9 billion, growing 2.1% in the past month. This indicator measures cumulative net capital inflow, reflecting strong fund injection momentum. The net realized profit/loss indicator further shows daily net capital inflow exceeding $1 billion in recent weeks, indicating buyers' willingness to absorb sell orders at current prices with robust demand. In comparison, realized losses only account for 1-2% of total transaction volume, suggesting most high-point buyers are still holding and observing, with market sentiment leaning optimistic.
Secondly, price recovery significantly relieved investor financial pressure. At the recent low of $74,000, over 5 million BTC were underwater. As prices rebounded to $97,000, about 3 million BTC returned to profitability, especially Short-Term Holders' (STH) portfolios. The unrealized loss indicator shows STH's financial stress has fallen from the +2σ high during the August yen arbitrage trade collapse and early 2025 market downturn to a neutral level. This improvement directly manifests in trading behavior: a surge in STH profitable trade proportion signals a market turning point from loss-dominated to profit-dominated.
Additionally, Long-Term Holders' (LTH) behavior is worth noting. Since the low point, over 254,000 BTC have been held for more than 155 days, showing long-term investors' confidence in current prices. The Realized Supply Density indicator further reveals a concentration of BTC with similar cost bases around current prices. These coins were mainly accumulated between December 2024 and February 2025, and survived recent market lows without being sold. The presence of this supply increases market sensitivity to price fluctuations, where minor changes could trigger large-scale trading.
Lastly, the options market provides an external volatility perspective. 1-week and 1-month ATM implied volatility has dropped to the lowest since July 2024, reflecting investors' underestimation of future volatility. Historically, low volatility often presages high volatility periods. Combined with high on-chain supply density, the market might be brewing a storm.
Market Inflection Point: Undercurrents Beneath the Fever
Bitcoin's rally is in full swing, but the market stands at a delicate inflection point. Prices hover near Short-Term Holders' cost basis (around $95,000), a level that has historically been a litmus test for rallies. If this support holds, the market might further advance; if it breaks, recent momentum could be compromised.
On-chain and options market signals further intensthis uncertainty density means increased market sensitivity to price fluctuations, while low implied volatility suggests investors may be underestimating future volatility risks. External catalysts - such as Trump's Middle East trip or the Federal Reserve's economic data interpretation - could spark volatility.
Epil: Opportunities and Mand mist
The 2025 Bitcoin market is like a drama with rising climaxes. Trump's trade policies inject vitality into risk assets, the Federal Reserve's rate cut expectations ignite market imagination, and Wall Street's crypto layout endorses Bitcoin's long-term value. On-chain data delicately outlines a landscape of capital inflows, investor confidence restoration increased market sensitivity..
However, beneath the heat lies hidden mist. The market is at a critical point subtle changes in external variables might disrupt balance balance next, Reserve, direction of funds will be key clshort--term perspective., Bitcoin's decentralized nature and scarcity remain its, but macmacro economicical uncertainty,, regulatoryative pressure and competition from pose traditional safe-haven assets may challenges p>
For investors, this is a moment of both opportunities and risks. The words of an on-chain analyst might be worth pondering: "Bitcoin's value lies in the sovereignty it grants notaryationsations." In this digital wave, rationandality the best navigation mark. No matter how the marketket fluct, maintaining a a clear judgment may be more likely to lead to the distance.
