Author: Shaw, Golden Finance

Bitcoin surged strongly in the early hours today, briefly breaking through $124,400, setting a new high and surpassing the previous historical peak of $123,205.12 set on July 14. The cryptocurrency market saw a general rise, with Ethereum continuing to strengthen, having already reached its highest level since November 2021.

Meanwhile, the U.S. stock market's Nasdaq and S&P 500 indices continued to set closing historical highs. The "new star of the crypto world," Bullish, saw its debut stock price soar nearly 200% at one point, before significantly retreating to an 89% increase.

What are the driving factors behind this round of Bitcoin and cryptocurrency market increases, and how much momentum does this trend have?

I. What Factors Are Driving This Round of Market Increases

1. Rising Expectations of Federal Reserve Rate Cuts Driving Up Bitcoin and Other Risk Assets

The latest CPI inflation data from the U.S. this week met expectations, reinforcing market bets on a rate cut by the Federal Reserve in September. U.S. Treasury Secretary Becerra stated in an interview that the Fed's rates should be 150-175 basis points lower than they are now, suggesting that if the data is accurate, the Fed might cut rates sooner. Becerra believes there is a possibility of a 50 basis point cut, with a series of cuts potentially starting with a 50 basis point reduction in September. Trump continues to pressure the Fed, stating that rates should be lowered to 1%. Additionally, Goldman Sachs' macroeconomic research analysis predicts that the Fed will cut rates by 25 basis points in September, October, and December, totaling three cuts this year. The Fed is expected to cut rates two more times in 2026, each by 25 basis points, bringing the terminal rate range to 3-3.25%.

The deepening expectations of Fed rate cuts have significantly stimulated the rise of risk assets like Bitcoin. As the Fed cuts rates, U.S. Treasury yields decline, prompting more investors to seek higher-yielding alternative assets. This trend of capital flowing into non-traditional investment categories (such as cryptocurrencies) may further support greater upward potential for Bitcoin prices.

2. "Coin-Stock Convergence" Driving Continued Growth in the Crypto Market

The crypto market is moving in tandem with U.S. stocks, reflecting a sustained warming of global market risk appetite. Analysts note that this highlights the deep linkage between cryptocurrencies and the stock market, driven by the friendly policy environment of the Trump administration and significant institutional capital inflow. Analysts believe that the high correlation between cryptocurrencies and traditional stock markets is a notable feature of this round of increases. Speculative market segments and mainstream benchmark indices draw energy from the same source of optimism, reflecting a general increase in market risk appetite. This linkage effect indicates that digital assets are gradually integrating into the risk pricing system of traditional financial markets, with institutional investors viewing cryptocurrencies as an important component of their risk asset portfolios.

Moreover, the recent concentrated surge of several "crypto" hot stocks has also stimulated the strength of the crypto market to some extent. On August 13, the digital asset trading platform Bullish went public on the NYSE, with its stock price doubling at one point on its first day of trading, becoming another popular "crypto" stock in U.S. markets this year after the "first stablecoin stock" Circle. The stock experienced multiple trading halts due to volatility, closing at $68, up nearly 84% for the day, with a market capitalization approaching $10 billion. To prevent excessive price fluctuations, Bullish allocated about 20% of its issuance to individual investors, higher than the usual less than 10% ratio. The company had already secured $200 million in subscription intentions from well-known institutions like BlackRock and ARK Invest before the issuance, demonstrating Wall Street's strong interest in crypto trading platforms.

Circle also released its Q2 financial report for fiscal year 2025 on Tuesday. The report showed that as of the end of Q2, the circulation of USDC increased by 90% year-on-year to $61.3 billion, with total revenue and reserve income rising by 53% year-on-year to $658 million. The net loss for the quarter was $482 million, primarily impacted by two non-cash expenses related to the initial public offering (IPO).

3. Corporate Hoarding of Coins Intensifies, Institutional Capital Enters the Market

The trend of publicly listed companies establishing crypto treasury reserves has become popular, led by Michael Saylor's MicroStrategy. An increasing number of listed companies are adopting a strategy of hoarding Bitcoin, significantly boosting market demand. This practice has recently expanded to cryptocurrencies like Ethereum, driving up the entire digital asset sector. Bitcoin treasury reserve companies are represented by MicroStrategy and Metaplanet. Data shows that the top five Bitcoin reserve entities hold a total of 772,359 BTC. The top 100 entities hold a total of 951,323 BTC. The total number of Bitcoins held by various institutions has reached 3.64 million, with most held by exchange-traded funds (ETFs) and funds.

Additionally, TraderT monitoring data shows that the U.S. spot Bitcoin ETF saw a net inflow of $6 billion in July. Since August 6, the U.S. spot Bitcoin ETF has seen a week of consecutive net inflows, totaling $557.53 million. The large inflow of funds into Bitcoin spot ETFs has driven Bitcoin prices higher.

Unlike previous bull cycles dominated by retail investors, this round of the Bitcoin bull market shows clear institutional characteristics. The continuous inflow of ETFs provides stable funding support for Bitcoin, maintaining a relatively smooth upward trend even in the face of technical resistance. Standard Chartered Bank analysis points out that the allocation on corporate balance sheets in the Bitcoin space has influenced market perception and liquidity.

4. Favorable Regulatory Policies for Cryptocurrencies Driving Market Upward

Recently, a series of favorable regulatory policies for cryptocurrencies introduced in the U.S. have also driven the overall strength of Bitcoin and the crypto market. Last Thursday, Trump issued an executive order promoting alternative asset investments in retirement plans like 401(k), which include private equity, crypto assets, and more. Currently, 401(k) plans manage $9 trillion in assets, with over 90 million Americans using this plan. Previously, this plan primarily invested in low-risk assets such as Treasury bonds and mutual funds. Market estimates suggest that if 401(k) plans allocate just 2% of their assets to cryptocurrencies, it would mean an influx of about $170 billion—equivalent to two-thirds of the current market capitalization of crypto spot ETFs and listed reserves. For more details, refer to "From Low Risk to High Returns: The Deep Reasons Behind the Shift in U.S. 401(k) Investments."

Additionally, the U.S. Treasury auctioned a total of $100 billion in four-week Treasury bills last week, setting a historical record. The Treasury Borrowing Advisory Committee noted that the recent increase in stablecoin issuance has become one of the emerging sources of demand. According to the "GENIUS Act" promoted by President Trump, stablecoin issuers must use safe assets like Treasury bonds to back their crypto tokens, indirectly boosting demand for Treasury bonds. Since the introduction of the "GENIUS Act," the circulation of stablecoins has been continuously increasing. The stablecoin market has experienced a significant surge in market capitalization of $9.11 billion within 23 days. According to data collected from defillama.com and artemisanalytics.com, the total value of the stablecoin market has exceeded $270 billion. The substantial increase in stablecoin issuance and circulation has also become an important buying support for Bitcoin's strong rise.

II. What Is the Future Direction of Bitcoin and the Crypto Market?

As this bull market continues to heat up, what will be the future direction of Bitcoin, and can the cryptocurrency market continue to gain momentum? Let's take a look at market opinions and analyses.

1. IG market analyst Tony Sycamore stated that the momentum behind Bitcoin's rise comes from the increasing certainty of Fed rate cuts, continued institutional buying, and the Trump administration's easing of regulations on crypto asset investments. In a statement, he wrote: "From a technical perspective, if Bitcoin effectively breaks through $125,000, it could push its price up to $150,000."

2. Ben Kurland, CEO of the cryptocurrency research platform DYOR, stated: "Slowing inflation, heightened expectations of rate cuts, and unprecedented institutional participation brought by ETFs have created strong momentum. What’s different this time is that the demand base is more mature—this rise is not just retail frenzy, but also structural buying from asset management firms, corporations, and sovereign funds."

3. Jamie Coutts, Chief Crypto Analyst at Real Vision, estimates that U.S. federal debt has reached a record $37 trillion, and the growing money supply and escalating inflation concerns may lead to a renewed recognition of Bitcoin's monetary scarcity, potentially pushing Bitcoin's price above $132,000 by the end of 2025.

4. CryptoQuant analyst Axel Adler Jr released a chart indicating that although Bitcoin (BTC) has reached an all-time high (ATH), the actual profit-loss ratio remains around the average level. In this context, the risk of a significant trend reversal is significantly reduced compared to past instances when the profit-loss ratio peaked and the market overheated.

5. Swissblock, a crypto analysis company, stated, "We always hear people say: 'false breakout rebound. Offloading and taking over.' The reality is completely different. Since the low in April, this wave of the market has been driven by spot—large capital allocators are frantically buying up almost all remaining BTC. The ratio of futures to spot has fallen back to the lows of October 2022, signaling epic spot demand. This is real."

6. CryptoQuant analyst Axel Adler Jr analyzed that the issue in the later stages of the bull market is the decline in investors' risk appetite. Data shows that in March and December 2024, this indicator broke through 1.9, but currently, the indicator is forming a lower peak, with holders beginning to actively sell, putting pressure on the market. Although investors are still taking profits, the marginal premium on the cost basis brought by each new price increase is getting smaller. Analysts state that considering the Fed is expected to have two rate cuts this year, it is anticipated that there will be two more increases in this cycle, after which selling pressure will exceed demand, and the market will enter an adjustment phase.

7. Joe Lubin, co-founder of Ethereum and CEO of Consensys, stated that treasury companies may push ETH's market value to surpass BTC within a year.

8. CryptoQuant analyst CryptoOnchain stated, "Outlook: Market volatility is increasing, but the bull market structure remains intact. Short-term: High leverage, resistance levels, and increased inflows into exchanges raise the risk of sharp downward volatility in the market. Mid-term: Strong institutional inflows, ETF demand, and network upgrades should help mitigate severe market corrections and maintain a broader upward trend."

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