Key Points:
https://www.chinanews.com.cn/cj/z/sanlihe/index.shtml
1. In May 2025, Bitcoin pulled back sharply after breaking through the $110,000 all-time high.
2. However, the long-term bullish case for Bitcoin may remain intact, as institutional capital continues to flow into the crypto market.
3. Analysts forecast Bitcoin could reach a cycle high of $200,000 by the end of 2025.
From early April to late May 2025, Bitcoin staged a strong rally, surging from around $70,000 and breaking above the $110,000 threshold on
May 22, marking a new all-time high.
However, Bitcoin soon reversed course, plunging 3% in a single day. In just 24 hours, more than 210,000 traders were liquidated across the
crypto market, with total liquidations reaching $711 million.
Source: TradingView
Some Wall Street analysts have even sounded the alarm, warning that a Bitcoin bubble may be forming and that a bear market could be on
the horizon. Is this the end of Bitcoin’s rally—or the beginning of a new bull cycle?
Changing risk appetite
The continued fallout from former President Trump's tariff policy is reshaping global risk sentiment. According to the U.S. Department of
Commerce, U.S. GDP contracted at an annualized rate of 0.3% in Q1 2025—the worst quarterly performance since 2022.
Source: U.S. Department of Commerce
The University of Michigan’s Consumer Sentiment Index has declined for four consecutive months. Personal spending growth has slowed
from 0.7% to 0.2%, while the Mortgage Bankers Association's index shows a persistent downward trend in housing activity.
Source: University of Michigan
Meanwhile, both the ISM Manufacturing and Non-Manufacturing PMIs have fallen into contraction territory, signaling pressure on both
supply and demand.
Source: Trading Economics
Against this macroeconomic backdrop, market demand for safe-haven assets is rising. As a decentralized asset free from sovereign credit
risk, Bitcoin is increasingly exhibiting characteristics similar to gold.
Data shows that Bitcoin funds saw net inflows of $5.5 billion in May 2025, while gold funds experienced their first monthly outflow in 15
months. More investors are now viewing Bitcoin as a hedge against systemic financial risk—particularly amid heightened volatility in
traditional markets.
Inflation Cooling Weakens Bitcoin’s Hedge Appeal
Inflation was once a core pillar of Bitcoin’s early investment narrative. But unlike in 2021—when Bitcoin surged amid soaring inflation—the
current macro backdrop tells a different story. Inflation in the U.S. is now easing significantly.
April data shows that both core CPI and core PCE inflation continued to decelerate year-over-year, driven primarily by declining prices in
energy, used cars, and food.
Source: Trading Economics
While the University of Michigan’s one-year consumer inflation expectations ticked up to 6.6%, the broader economic slowdown makes it
unlikely that this upward trend will be sustained.
Source: FRED
Slowing inflation weakens Bitcoin’s positioning as an "inflation hedge." This has, to some extent, curbed the flood of unconditional capital
inflows—especially as investors begin shifting toward interest rate-sensitive assets. However, it’s worth noting that Bitcoin’s value proposition
is evolving. The narrative is gradually shifting from “inflation protection” to “macro hedge,” as Bitcoin becomes increasingly decoupled from
traditional risk asset cycles.
Rate Cut Expectations Rise
Against the backdrop of slowing economic growth and easing inflation, market expectations for a Federal Reserve rate cut are rising rapidly.
According to the CME FedWatch tool, investors are now pricing in the possibility of the Fed initiating its first rate cut as early as September,
with total cuts for the year potentially ranging from 50 to 75 basis points.
Source: CME
A more accommodative monetary policy environment presents a clear tailwind for Bitcoin prices. First, lower interest rates reduce the
opportunity cost of holding cash or short-term bonds, making non-yielding assets like Bitcoin more attractive. Second, rate cuts are typically
accompanied by a rebound in risk appetite, encouraging capital flows into crypto markets.
Historical precedent supports this thesis. During the ultra-loose monetary cycle that began in March 2020, Bitcoin surged more than 400%
from around $3,800 to $20,000 by December, and eventually reached an all-time high of approximately $64,800 in 2021—a staggering
1,500% gain from its 2020 low. Many parallels can be drawn between the current macro environment and that earlier cycle.
Source: TradingView
Bitcoin’s Role as an Alternative Asset Strengthens
Worsening U.S. Fiscal Deficit and Debt Fuel Bitcoin’s Macro Case.The persistent deterioration of the U.S. fiscal deficit and sovereign debt
has emerged as a key variable shaping financial asset valuations in 2025. As of the end of May, total U.S. federal government debt had
surged to $36.2 trillion—doubling over the past decade—with annual interest payments surpassing defense spending for the first time in
history.
Should the Trump administration’s proposed “Big, Beautiful Bill” pass, it could add an estimated $2.4 trillion to the federal deficit over the
next 10 years, further undermining the sustainability of U.S. public finances. Such a trajectory raises structural concerns about the long-term
credibility of the U.S. dollar and its status as the world’s dominant reserve currency.
In this context, Bitcoin’s decentralized and fixed-supply nature is increasingly positioning it as a viable fiat alternative. Institutional investors,
sovereign wealth funds, and family offices are reassessing their allocation strategies, as evidenced by the sustained inflows into Bitcoin
ETFs.
Data shows that in May 2025 alone, global spot Bitcoin ETFs recorded over $5.5 billion in net inflows—far exceeding the $890 million
directed into Ether ETFs. BlackRock’s iShares Bitcoin Trust (IBIT) has surpassed $70 billion in assets under management, setting a new
record as the fastest-growing ETF in history.
Wall Street analysts are responding by raising their Bitcoin price targets. Fundstrat founder Tom Lee projects that Bitcoin will reach
$250,000 by the end of 2025. Lee previously predicted with accuracy that Bitcoin would surpass the $100,000 mark in 2024.
Bernstein analyst Gautam Chhugani forecasts a cycle-high of $200,000 for Bitcoin by the end of 2025. He argues that as crypto assets go
mainstream, they will likely merge with and transform capital markets. Over the next decade, he believes Bitcoin could ultimately replace
gold as the dominant store-of-value asset in the new financial era.
Conclusion
While cooling inflation has diluted some of Bitcoin’s traditional “inflation hedge” narrative, macro variables such as rising economic
uncertainty, a potential Fed rate-cut cycle, and mounting fiscal risks continue to support its long-term bull case.
Despite trading near all-time highs, the structural macro backdrop and steady inflows from institutional investors suggest the broader
uptrend may still be intact.
On June 10, Bitcoin briefly reclaimed the $110,000 mark—the first time in two weeks—just $2,000 shy of its record high set in May.
Technical analysis indicates that after decisively breaking above the $100,000 psychological threshold, resistance has weakened. The next
major target range lies between $180,000 and $200,000. At the time of writing, Bitcoin continues to hold above the $100,000 level.
Source: TradingView
