The "$110,000 Dilemma" of Bitcoin: A panoramic view of the market undercurrents, institutional ambitions, and macro variables in the Bull vs Bear Battle.

Written by: White55, Mars Finance

1. Price Stalemate: A Dual Game of Technical and Sentiment Factors

(1) The "psychological spell" of 110,000 USD: The misalignment between historical highs and market expectations.

After Bitcoin broke through $100,000 in April 2025, it entered a new round of upward cycle, reaching a historical high of $111,957 in mid-May. However, the price has since oscillated between the range of $105,000 and $112,000, failing to form an effective breakthrough. This phenomenon sharply contrasts with the rapid rise in the market when it broke through $100,000 in December 2024, reflecting the current complex contradictions in the market.

From a technical perspective, the weekly RSI indicator of Bitcoin has entered the overbought zone, and the MACD momentum bars continue to narrow, indicating a decrease in short-term upward momentum. On-chain data shows that the proportion of long-term holders (LTH) has dropped from 76% at the beginning of the year to 72%, with some "old miners" and early investors starting to take profits, leading to an increase in net inflow to exchanges. This phenomenon of loosening chips is similar to the characteristics observed at the end of the 2021 bull market.

On the other hand, the derivatives market reveals a completely different signal. As of May 26, the annualized basis rate for Bitcoin futures remains at 8%, far lower than the extreme level of 20% when it breaks $100,000 in December 2024, indicating that leveraged long positions are not overly aggressive. Meanwhile, the Delta skew index in the options market (-6%) shows that put options are trading at a discount, which is a typical characteristic of a bullish market structure, contrasting with the +15% skew during the bear market of 2024.

Image 1: Bitcoin 2-month futures annualized basis rate.

(2) The "ice and fire" of market sentiment: the influx of institutions and the caution of retail investors.

Institutional capital continues to flow in, becoming the core support for the market. Data shows that from May 19 to 25, net inflows into U.S. spot Bitcoin ETFs reached $2.75 billion, setting a new weekly high since Trump's victory in December 2024. Among them, BlackRock's IBIT and Fidelity's FBTC ETFs together account for 80% of the market share, indicating that traditional asset management giants are becoming the dominant players in Bitcoin pricing.

It is worth noting that JPMorgan announced on May 19 that it would allow clients to purchase spot Bitcoin ETFs through brokerage accounts. Although this move does not directly involve custody services, it potentially opens the entry channel for its $6 trillion in client deposits, which could trigger a "catfish effect"—institutions like Goldman Sachs and Citigroup may be forced to follow suit to remain competitive.

In contrast, retail investors are adopting a cautious attitude. The Crypto Fear and Greed Index has fallen from 78 (Extreme Greed) in early May to 65 (Greed), while the search interest for the keyword "Bitcoin bubble" on Google has increased by 320% year-on-year. This divergence reflects the anxiety of ordinary investors about high-level fluctuations, contrasting sharply with institutions' "buy the dip" strategy.

II. Macroeconomic Variables: The Trio of Trump Policies, Federal Reserve Shift, and Tech Stock Correlation

(1) Trump's "Tariff Game": How Geopolitics Reshapes the Pricing Logic of the Crypto Market

On May 26, Trump announced a postponement of the 50% tariff on EU imports until July 9. This decision ostensibly alleviated the risk of escalating trade wars, but it actually hinted at political maneuvering. Historical data shows that tariff policies during Trump's term have been highly volatile—his sudden announcement in February 2025 of a 25% tariff on EU automobiles led to a 12% drop in Bitcoin in a single day.

The current market is more focused on the progress of its cryptocurrency strategic reserve plan. Although the March White House summit only proposed a regulatory framework for stablecoins, the "National Bitcoin Reserve Act" draft introduced by Senator Lummis has entered the legislative process. This bill requires the U.S. Treasury to purchase 5% of the circulating supply of Bitcoin (approximately 1.05 million coins) over the next five years, which would directly create nearly $100 billion in demand if implemented.

(2) The Fed's "Inflation Puzzle": PCE Data May Be the Key Catalyst for Breakthrough

The market is highly sensitive to the PCE inflation data released on May 30. Current CME rate futures show traders betting on a 68% probability of a 25bp Fed rate cut in June, but a core PCE growth of more than 2.9% YoY (previous 2.8%) could reverse easing expectations. It is worth noting that Bitcoin's 90-day correlation coefficient with the Nasdaq index has fallen to 0.32 from 0.75 at the beginning of the year, indicating that it is moving away from the traditional risky asset framework and moving closer to the "digital gold" narrative.

(3) The "Butterfly Effect" of Nvidia's Financial Report: The Secret Connection Between the AI Computing Revolution and the Crypto Market

NVIDIA will release its quarterly earnings report on May 28, and its performance may impact Bitcoin through two pathways:

Mining Power Competition: If the demand for the new generation of AI chips exceeds expectations, it may drive up GPU prices, indirectly increasing the cost of upgrading Bitcoin mining machines and squeezing miners' profit margins.

Capital diversion: If technology stocks rise due to positive earnings reports, it may attract some funds from the crypto market to shift towards the traditional stock market, exacerbating short-term volatility of Bitcoin.

3. Institutional Dark Wars: MicroStrategy's "HODL Economics" and the Evolution Theory of ETFs

(1) MicroStrategy's "Extreme Measures": The Strategic Ambition Behind the Balance Sheet Reconstruction

MicroStrategy, led by Michael Saylor, increased its holdings by 4,018 bitcoins at an average price of $106,237 from May 19 to 25, bringing its total holdings to 324,000 bitcoins (worth approximately $34.5 billion). Interestingly, the coupon rate for the convertible bonds the company raised has skyrocketed from 0.625% in 2024 to 6.25%, indicating a change in the capital market's risk pricing for its aggressive strategy.

This "debt-driven coin hoarding" model is beginning to form a demonstration effect. Data shows that as of May, 17 companies in the S&P 500 index have publicly held Bitcoin, with a total scale of 48.7 billion dollars. Companies like Tesla and Block have even begun exploring the use of Bitcoin to pay for supply chain payments, promoting its evolution from a reserve asset to a medium of circulation.

(2) The "Matthew Effect" of the ETF Ecosystem: Market Reconstruction under the Dual Giants of BlackRock and Fidelity

Since the approval of the US spot Bitcoin ETF in January 2024, the total assets under management (AUM) have surpassed $120 billion. Among them, BlackRock's IBIT ($48.6 billion) and Fidelity's FBTC ($39.2 billion) together account for 72% of the market share, creating an absolute monopoly. This trend of centralization may raise regulatory concerns—the SEC is studying whether to propose new regulations on "reserve asset transparency" for ETF issuers, requiring the disclosure of custody addresses and on-chain verification mechanisms.

The more profound impact is that ETFs are changing the volatility characteristics of Bitcoin. According to calculations based on daily net inflow/outflow data, the explanatory power of ETF fund flows on Bitcoin price fluctuations has reached 38%, which means that the opening hours of traditional financial markets (Eastern Time 9:30 AM - 4:00 PM) are becoming the main battleground for Bitcoin price volatility, forming a paradox with the early 7×24 hours continuous trading "decentralized" feature.

Figure 3: Bitcoin price declines as funds flow out of spot Bitcoin ETFs.

4. Technological Revolution: The Explosion of Layer 2 Ecosystem and the Feasibility Experiment of "Bitcoin Standard"

(1) Lightning Network 2.0: The "Singularity Moment" in the Payment Track

The upgraded version of the Bitcoin Layer 2 solution, Lightning Network 2.0 (LN2.0), made significant breakthroughs in May:

Channel capacity突破 8000 BTC,同比增加 320%；

Supports Atomic Multi-Path Payment (AMP), with single transaction processing capacity increased to 0.1 BTC;

Pilot cross-border remittances in collaboration with Visa, with fees reduced to below 0.3%.

These developments are changing the utility boundaries of Bitcoin. The Salvadoran government announced that 20% of public servant salaries will be distributed via the Lightning Network, and Amazon Mexico has accepted Bitcoin Lightning payments. If this dual function of "micro high-frequency payments + value storage" is solidified, Bitcoin could truly challenge traditional payment giants like Visa and PayPal.

(2) The "Smart Contract Breakthrough" of the RGB Protocol: A Hidden War Challenging Ethereum

The RGB protocol based on the Bitcoin UTXO model completed its v0.5 upgrade in May, achieving Turing-complete smart contract functionality for the first time. Although the current ecosystem scale is still small (with a total locked amount of only $120 million), its architecture, which incorporates client-side validation and off-chain computation, demonstrates unique advantages in privacy and scalability. Notably, MakerDAO founder Rune Christensen has announced plans to explore transferring a portion of DAI's reserve funds into the RGB protocol, which could become a landmark event for DeFi funds flowing back into the Bitcoin ecosystem.

V. Future Scenario Simulation: The Fate of Bitcoin Under Three Paths

(1) Bull Market Scenario (2025 Year-end Target: $180,000 - $250,000)

Trigger condition:

U.S. PCE inflation data is below 2.6%, the Federal Reserve starts its rate cut cycle in June;

The national Bitcoin reserve bill has been passed, and the Ministry of Finance has initiated a monthly coin purchase plan;

The Bitcoin Layer 2 ecosystem's locked position has surpassed 10 billion USD, with over 50 million users in payment scenarios 37.

Technical Form: The weekly level will form a "cup and handle" pattern, accelerating upward after breaking through $112,000, replicating the momentum effect seen in December 2024 when it broke through $100,000.

(2) Oscillation Scenario (Price Range: $100,000 - $140,000)

Core Variables:

NVIDIA's financial report shows weak demand for AI chips, and the pullback in tech stocks drags down risk assets;

Trump's tariff policy has repeatedly triggered market risk aversion.

The speed of ETF capital inflows has dropped to an average of less than 1 billion dollars per week.

Market characteristics: increased selling pressure from miners, extended adjustment cycle for mining difficulty, and funding rates for derivatives hovering at persistently low levels.

(3) Bear Market Scenario (Retracement Target: $74,000 - $85,000)

Risk Catalyst:

The US SEC conducts a surprise investigation into the ETF reserve custody situation, triggering a trust crisis;

The escalation of geopolitical conflicts in the Middle East has driven up oil prices, reversing global inflation expectations;

Quantum computing breakthroughs raise concerns about the security of Bitcoin's encryption algorithms 89.

On-chain signal: The net inflow to exchanges has exceeded 50,000 BTC for three consecutive weeks, and the holding ratio of long-term holders has fallen below 70%.

Conclusion: Finding certainty in uncertainty

The $110,000 tug-of-war of Bitcoin is essentially a microcosmic reflection of the collision between the old and new financial order. From Trump's tariff battles to MicroStrategy's balance sheet revolution, from the payment penetration of the Lightning Network to the institutional transformation of ETFs, multiple forces are reshaping the economic significance of this experiment. Historical experience shows that whenever Bitcoin's "death notices" flood the media, it often presents a good opportunity for long-term investors to position themselves in the opposite direction. When the market loses its direction in the noise, it may be more appropriate to return to the original vision of Satoshi Nakamoto's white paper — "a purely peer-to-peer electronic cash system." In this sense, the price fluctuations in 2025 are merely footnotes to this great social experiment; the real revolution has already quietly grown in code and consensus.