The information, opinions and judgments on markets, projects, currencies, etc. mentioned in this report are for reference only and do not constitute any investment advice.
In the December 2024 report, EMC Labs pointed out that the world is still in a cycle of interest rate cuts, and the current cooling is only a temporary setback. As liquidity gradually recovers, BTC will hit the $100,000 mark again after adjusting at a high level.
In January 2025, the Federal Reserve suspended its interest rate cuts as expected, but BTC still relied on medium- and long-term liquidity and optimistic sentiment to break through the $100,000 mark as judged in the December report, closing at $102,411.26, and reaching a new high of $109,358.01 in the middle of the month.
With Trump’s inauguration on January 20, the world welcomed the most crypto-friendly American president. He intensively released a series of crypto-friendly initiatives and unexpectedly issued personal MEME coins. At the same time, the “BTC Strategic Reserve” proposal was also intensively carried out in many states in the United States and continued to make progress.
These measures and progress have greatly stimulated market sentiment, driving more than $16.4 billion into the crypto market in January, allowing BTC to achieve a 9.7% surge in the first month of 2025, far exceeding the Nasdaq and gold in the same period.
Whether from the perspective of BTCs 4-year production reduction cycle or the perspective of global currency macro-liquidity, BTC is still in the rising period (that is, the bull market) of the EMC Labs large cycle model.
The market has adjusted the 2025 Fed rate cut expectations from 4 to 2 and priced in the yen rate hike, and has maintained a relatively intact trend. Since February, the factors affecting short- and medium-term price performance have shifted to whether Trumps economic policies will lead to rising inflation, which has led to the Feds expectations of rate cuts continuing to decline or even increase interest rates. However, the market has insufficiently priced in the volatility that may be caused by Trumps tariff policy, and it is inevitable that the stock market and BTC, which are at a high level, will experience price fluctuations in the short term.
Macro Finance: Crypto assets are officially accepted by the US government
With the release of December CPI and non-farm payrolls data in January, the judgment that the US economy is “not landing” has become increasingly clear.
In December, CPI rose by 2.9% year-on-year, in line with market expectations, and the previous value was 2.7%; core CPI rose by 3.2% year-on-year, slightly lower than the market expectation of 3.3% and the previous value was 3.3%. In December, PCE increased by 2.5% year-on-year, and the previous value was 2.4%; core PCE increased by 2.8% year-on-year, the same as the previous value. In December, non-agricultural employment increased by 256,000, far exceeding the market expectation of 165,000; the unemployment rate fell to 4.1%, lower than the expected 4.2%.
Inflation data remain sticky while employment data remain strong, making it inevitable that the Fed will stop cutting interest rates at the end of January.
Because this result has been priced in by the market, although the stock market, gold, and BTC all experienced violent fluctuations in the middle of the month, they all recorded increases in the end. Among them, the Nasdaq, Dow Jones, and SP 500 recorded increases of 1.64%, 4.7%, and 2.7% respectively throughout the month. London gold closed at $2,801 per ounce, setting a new high. BTC rose 9.7% in the month, setting a record high of $109,358.01 during the session.
After three consecutive months of sharp rise, the rise of the US dollar index finally slowed down, with a monthly increase of 0.3363%, still at a high of 108.5160, which continued to put pressure on non-US dollar-denominated assets. Both long-term and short-term US bonds slowed down their gains and consolidated at high levels, with yields slightly rising to 4.543% and 4.155%.
Currently, all major asset classes have completed pricing in lower interest rate cut expectations after the necessary chaos. The next round of trading will revolve around Trump’s economic policies, among which tariffs are the most important part.
On February 1, the United States imposed a 25% tariff on two major trading partners, Canada and Mexico, and a 10% tariff on China, and said it would also take action against the European Union. After the news was confirmed, the three major stock indexes and BTC all recorded large declines on the last trading day of January.
After being sworn in, Trump began to fulfill his promise to the Crypto community. On the 23rd, a digital asset market working group was established, which will submit a report to the president within 180 days after the issuance of the executive order. The report includes: the federal government regulatory framework for the issuance and operation of digital assets in the United States, including stablecoins, considering market structure, supervision, consumer protection and risk management regulations, and evaluating the possibility of establishing and maintaining a national digital asset reserve and the standards for establishing such a reserve.
The establishment of this working group marks the official adoption of crypto assets at the highest level in the United States. The specific policies subsequently issued will have a profound impact on the digital asset market in the United States and even the world.
In addition, there is a more specific long-term benefit for BTC at the policy level, namely the BTC Reserve Act. Fifteen US states, including Pennsylvania, Oklahoma, and Ohio, are discussing or promoting the Bitcoin Reserve Act, which aims to include Bitcoin in state-level strategic reserves to hedge against inflation and promote fiscal stability. Among them, the plans of Arizona and Utah have entered the White House and senator approval stage, and are only one step away from becoming law.
The advancement of the Reserve Act will undoubtedly provide strong confidence support for BTC holders and bring new long-term buying power to the market.
Crypto assets: Waiting to break through the new box
In January, BTC opened at $93,347.59 and closed at $102,411.26, up 9.7% with an amplitude of 21.78%. It hit an intraday all-time high of $109,358.01, and trading volume shrank compared with the previous month.
BTC price trend (daily)
Technically, since early November, the price of BTC has formed a box structure ranging from $89,000 to $110,000 (the purple range in the above figure), which can be called the Trump bottom. This range was established before and after Trump took office, and can be considered the markets pricing range for Trumps crypto-friendly policies.
At the same time, the second rising trend line (blue dotted line in the above figure) established based on the expectation of Trumps victory and the announcement of his victory also provided support for the BTC price twice this month on January 13 and 27. The second rising trend line and the upper edge of the $89,000-110,000 box are about to intersect, forcing the market to make a directional choice in the short term.
In terms of trading volume, the peak was reached on January 20, the day Trump was sworn in, and then gradually declined, showing that the market chose a cautious attitude towards BTC at a high level. The decline in liquidity will inevitably weaken BTCs short-term trend.
Judging from technical indicators, the short-term trend is not optimistic, and there is a greater possibility of downward pricing. However, the market structure has been changing since this cycle, and upward pricing is more done by the big funds behind Microstrategy and BTC ETF. Therefore, it is more effective to make medium- and long-term observations and track the dynamics and medium- and long-term actions of this part of funds.
Funds: Inflows up to 16.4 billion
Since the Trump rally started in November, new funds have continued to flow into the market and become the backbone of taking over the long and short selling pressure to push up BTC prices.
This months inflows continued the trend since November, exceeding Decembers level to reach $16.406 billion.
eMerge Engine Crypto Market Capital Inflow Statistics (Monthly)
Among the 31 trading days, only 9 trading days recorded net outflows, which is comparable to the number of days that BTC rose and fell this month (11 days of decline). This reflects that after the global interest rate cut cycle, the abundant liquidity has led to an increase in investors risk appetite, the long-term trend of risky assets being sought after, and the increasing adoption of BTC driven by US policies.
However, it is necessary to be vigilant that after the strong inflow, accompanied by the impact of tariff uncertainty, once the capital inflow slows down, the BTC price may experience a sharp short-term adjustment.
Secondary sell-off: New range sell-off gradually slows down
Since BTC broke through the new high consolidation zone in October, long-term BTC investors have started the second round of selling in this cycle. According to historical rules, with the injection of liquidity and the rise in prices, the second round of selling by long-term investors will continue until the liquidity is drained, leading to the end of the bull market, and the price will fall again cyclically.
BTC long-hand, short-hand, miner and exchange inventory statistics (monthly)
The sell-off is still going on, and while it is huge, it has not yet reached the point where liquidity is drained out. In fact, the amount of sell-off has been decreasing month by month since November, and the inventory on exchanges has also been decreasing.
BTC sell-off and exchange inventory change statistics (monthly)
Most of the selling so far has occurred above $90,000, that is, after November. This makes the scale of BTC distributed in the $89,000-$110,000 range reach 4,138,554.23, accounting for 24.22% of the total supply.
This part of the chips has formed the bottom of a new step, which can be called the Trump bottom. The core buying volume at this stage came from institutional investors who entered the Microstrategy and BlackRock BTC ETF channels after Trump won the election.
EMC Labs believes that the Trump bottom is solid enough, and as long-term selling slows down in the range of $89,000 to $110,000, BTCs medium- and long-term upward momentum is far greater than its downward gravity. However, in the short term, it may be under the pressure of panic caused by tariffs, and there is a small probability of falling below the price, depending on the liquidity of funds.
Conclusion
With the introduction and gradual implementation of crypto-friendly policies in the United States, crypto assets represented by BTC have moved from the margins to the center of the stage, ushering in a new stage of development.
New holders are pouring into the BTC market, exchanging their holdings for higher purchase prices or floating losses caused by market turmoil. New investors are motivated by the new use case scenarios that BTC is developing (large company allocations, state government reserves, and even federal government reserves). This new use case allows BTC value and price to be revalued in new scenarios, and the control of price may also change fundamentally.
In the medium term, from the perspective of internal holding structure, external capital supply and investor sentiment, BTC has basically completed the forging of the Trump bottom and is ready to break through to the next price range.
The biggest external uncertainty comes from the chain reaction of interest rate cut expectations and capital supply after the implementation of Trump’s economic policies. Once liquidity is constrained, volatility will rise sharply.
EMC Labs was founded by crypto asset investors and data scientists in April 2023. It focuses on blockchain industry research and Crypto secondary market investment, takes industry foresight, insight and data mining as its core competitiveness, and is committed to participating in the booming blockchain industry through research and investment, and promoting blockchain and crypto assets to bring benefits to mankind.
For more information, please visit: https://www.emc.fund
