【MICA RESEARCH】The crisis of confidence in USD assets pushes Bitcoin to break historical highs.

Bitcoin successfully broke through the all-time high last week, the price came to $110,000, not only the price breakout, the rise is quite healthy, investors did not buy bitcoin through leverage, but mainly benefited from institutional funds and ETF buying to push the price of bitcoin up, although on Friday was intimidated by Trump EU levy of 50% and Apple's 25% tariff event and slightly revised to $107,000, but the overall market chips and funds are still quite healthy.

The reason for the strong upward momentum of Bitcoin last week is primarily due to the global investors' decreasing interest in dollar assets, amid concerns that the U.S. "Too Big to Fail" tax cut plan will significantly increase the U.S. fiscal deficit and accelerate the bankruptcy crisis in the U.S. As a result, U.S. Treasury prices have also seen a remarkable decline, with the yield on 30-year bonds even breaking 5.1%, indicating that investors are no longer willing to foot the bill for the U.S.'s reckless fiscal behavior. Consequently, Bitcoin has become the best destination for capital, with a large influx of funds continuously pouring into Bitcoin, which has also driven up the prices of other competing coins.

Grayscale's research director Zach Pandl stated that the Trump administration's attempts to reduce the "deficit-to-GDP ratio" policy may bring positive benefits to Bitcoin. When Trump won the election last November, the market anticipated that his policies would be friendly to the cryptocurrency industry, with not only a potentially relaxed regulatory environment but also economic policies that could be positively impactful.

The U.S. government plans to improve its financial situation through economic growth rather than spending cuts. He emphasized that tax cuts can stimulate economic growth to offset concerns about rising debt. Zach Pandl believes this is a high-growth strategy, which is more beneficial for scarce assets like gold and Bitcoin when the economy is moving towards easing. Before the Fed has successfully lowered inflation to its target of 2%, economic growth may exacerbate inflationary pressures, further stimulating demand for inflation-hedging assets like Bitcoin.

But the market does not buy the growth strategy of the US government, blindly believing that tax cuts and disregard for fiscal discipline will lead to a fall in bond prices, which in turn will push up the cost of corporate borrowing, in which case the US government's strategy will fail, and at the same time they have implemented tariffs sharply, making the cost of imports rise again, and many conflicts bet that they will not succeed, this situation is obvious, so it is not surprising that global institutional investors' funds are going to Bitcoin, and let's talk about the details of the US tax cut bill, assuming that the Trump administration continues to insist on implementation Then the price of bitcoin will only get higher and higher.

Sources: MICA RESEARCH#### A. May 19 Glassnode Report: Spot Buying Pressures Increase Bitcoin Price, Pump Momentum Expected to Continue

According to Glassnode's latest report, Bitcoin surged to $106,000 earlier this week, mainly driven by strong demand in the spot market, with daily net buying pressure on Coinbase reaching as high as $45 million. Unlike past increases dominated by leveraged speculation, this time it is mainly driven by natural accumulation in the spot market. The report points out that Bitcoin saw a large amount of turnover in the $93,000 to $95,000 range, which has now become a key support level, overlapping with the cost basis of investors who entered the market in the past 155 days.

The derivatives market shows signs of lagging, with open interest in perpetual contracts decreasing by 10%, from 370,000 Bitcoins to 336,000, which may indicate that shorts are being liquidated. However, the funding rate remains neutral, suggesting that leveraged long positions are not yet overheated, which could provide momentum for further upward movement. The inflow of spot Bitcoin ETFs has also played a key role, peaking at $389 million on April 25, and stabilizing at around $58 million daily thereafter.

Despite the ongoing bullish trend, long-term holders are starting to realize profits. CryptoQuant analysts point out that the Binary CDD indicator has risen to 0.6, indicating that dormant Bitcoin is beginning to move, but has not yet reached the 0.8 level seen in previous bull market peaks. Glassnode data also shows that short-term holders are gradually realizing profits, but have not yet reached levels commonly seen during past market peaks, indicating that market demand has not yet dried up.

B. On May 22, the U.S. tax reduction bill raised concerns over the fiscal deficit, and Bitcoin broke through $109,000

As Congress pushes a new tax and spending bill that continues the tax reduction policies from the Trump era, it is expected to significantly increase federal debt over the next decade, triggering a rise in market risk aversion. U.S. Treasury yields have surged recently, drawing heightened market attention. The results of Wednesday's auction of 20-year Treasuries indicated weak demand, causing the yield on 30-year Treasuries to soar to 5.1%, a new high since November 2023, while the yield on 10-year Treasuries also rose to 4.61%. The main reason for the soaring yields is the increasing concern in the market over the widening fiscal deficit of the U.S. government.

Rising yields not only raised borrowing costs, but also weighed on the stock market. The S&P 500 fell 1.6% on Wednesday, its second straight day of declines. Morgan Stanley pointed out that a stable 10-year yield rate above 4.5% will significantly lower stock market valuations, especially when the current S&P 500 P/E ratio is as high as 23.82, well above the 10-year average, the market may be more sensitive.

At the same time, the credit rating agency Moody's has downgraded the credit rating of U.S. Treasury bonds, no longer granting the highest AAA rating. This reflects the international market's doubts about the sustainability of U.S. debt and further undermines the status of U.S. bonds as a global "risk-free asset." Overall, the continuously expanding deficits and debt levels in the U.S. are putting multiple pressures on the market, from soaring government bond yields to stock market volatility, indicating that investors are holding a cautious or even pessimistic attitude toward future economic and fiscal policy directions. Conversely, funds are flowing into Bitcoin, which continues to break historical highs, with prices already reaching $109,000.

C. May 23 CryptoQuant Report: The upward momentum in the crypto market is healthy and not overheating

Bitcoin recently broke through the $110,000 mark to a record high, and this rally was mainly driven by a rush of institutional funds into the venue. According to the CryptoQuant analysis, the market is currently still in a healthy upward phase, with relatively mild signs of overheating. Funding rates and short-term trading activity have risen, but they are still solid compared to previous bull market peaks, and short-term holders have not taken profits aggressively, even the big whales have remained on the sidelines.

The holdings of spot Bitcoin ETFs in the United States have reached a record high, indicating strong market demand and becoming an important driving force behind this round of price pump. Experts point out that this market surge is different from previous ones driven by retail speculation, as it is mainly led by institutional investors making rational allocations. Senior executives at Binance stated that Bitcoin is evolving from a technological curiosity into a globally recognized store of value asset, benefiting from mature regulations and increased market transparency.

Santiment emphasizes that the ETF has seen net inflows of funds for six consecutive days, with retail investors' FOMO cooling down, indicating a gradual maturation of the market. BlackRock's IBIT ETF currently holds over 636,000 Bitcoins, surpassing the total of 14 other U.S. ETFs, and attracting institutional participants such as Mubadala and Citadel. At the same time, companies like MicroStrategy and Metaplanet continue to increase their holdings, with Bitcoin's price rising over 25% in the last 30 days and nearly 60% year-on-year. Santiment estimates that this wave of growth may continue to $115,000 to $120,000, creating stable upward space for institutional funds with low retail participation.

The U.S. tax reduction bill has passed, and the fiscal deficit will become a driving force for Bitcoin

Let's first take a look at the views of Jamie Dimon, the CEO of JPMorgan. Although he is an opponent of Bitcoin, his opinions and insights have a certain degree of influence on the market. At the "JPMorgan Global China Summit" held in Shanghai, he stated that the massive tax cuts and spending bill proposed by President Trump may bring short-term stability, but it does not help reduce the deficit.

Jamie Dimon pointed out that this bill could increase the U.S. debt by $3.8 trillion over the next decade, further pushing the current national debt, which has already reached $36.2 trillion, even higher. Credit rating agency Moody's has downgraded its credit rating due to the worsening U.S. debt. He admitted that the deficit will continue to expand and called on the government to maintain "responsibility" in spending, avoiding inefficient budgets and investments. He criticized governments around the world for generally "spending without restraint and setting regulations that hinder growth," emphasizing that only effective planning and spending can truly promote the economy and reduce the deficit, but this approach is absent in Trump's "beautiful bill."

Moreover, Jamie Dimon stated to Bloomberg that the U.S. economy is facing pressures from geopolitical issues, debt, and inflation, and may fall into stagflation in the future. He supports the Federal Reserve's cautious policy direction and believes that the current decision-making is prudent and correct. The Federal Reserve has remained inactive earlier this month but has expressed concern over inflation and unemployment risks, further adding to the uncertainty of the economic outlook.

The tax cut bill is expected to reduce the revenue of the US government, so the United States is also actively expanding fiscal revenue through tariffs, and US President Trump threatened on social platforms on Friday to impose 50% tariffs on EU goods from June 1, 2025, and 25% tariffs on Apple if it does not move iPhone production back to the United States. The move reflects his ability to influence the global economy with a community voice, as well as the failure of his tariff policies to lead to trade deals or the return of manufacturing as promised.

This move caused a decline in US stocks, with the S&P 500 index dropping by about 1%. Treasury Secretary Becerra attempted to ease tensions, stating that EU negotiators were in disarray, and emphasized the hope that Apple would relocate its chip supply chain back to the US. However, once Trump's statement was released, it immediately had a severe impact on the cryptocurrency market. Bitcoin fell from a high of 111,000 USD to below 109,000 USD. According to CoinGlass data, more than 150,000 high-leverage traders were liquidated that day, with a total liquidation amount exceeding 450 million USD.

It is expected that the market will fluctuate repeatedly between the themes of "trade war" and "confidence in the US dollar." We will see how the media and Trump influence the direction, but we anticipate that Bitcoin will continue to rise amid market uncertainty and the deteriorating fiscal situation in the United States. Bitcoin will become a better dollar hedge asset than gold.

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Disclaimer: The article only represents the author's personal views and opinions, and does not represent the views and positions of the blockchain. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and the blockchain will not bear any responsibility for any direct or indirect losses incurred by investors' trades.

Disclaimer: This article is for providing market information only. All content and views are for reference only and do not constitute investment advice, nor do they represent the views and positions of the blockchain. Investors should make their own decisions and trades; the author and blockchain will not bear any responsibility for any direct or indirect losses incurred by investors' trades.