Bitcoin Supply Hits Crisis Levels as Global Markets Rally on Trade Truce
Digital Asset Market: Bitcoin is hovering around $104,000 as its illiquid supply has hit a record 14 million BTC, marking the largest 30-day increase of the current bull market and signaling that more coins are being held by long-term investors who rarely sell. Onchain analytics from Glassnode show that whales—large holders with 10-10,000 BTC—have accumulated over 83,000 BTC in the past month, further fueling the trend of declining liquidity, while retail investors have sold off small amounts. This surge in illiquid holdings coincides with increased institutional involvement, including corporate treasuries and spot Bitcoin ETFs, making Bitcoin a mainstream investment and setting new records for supply held by entities expecting long-term price appreciation. Against this backdrop, billionaire venture capitalist Tim Draper predicts that Bitcoin will reach $250,000 by the end of 2025 and eventually replace the U.S. dollar as the world’s primary currency within a decade, driven by diminishing trust in fiat banks and governments. Draper advises companies to hold Bitcoin alongside traditional fiat to protect against potential bank failures and a global shift to a Bitcoin standard, as witnessed during the 2023 banking crisis. He dismisses stablecoins as susceptible to inflation like government currencies, while championing Bitcoin for its robust, and decentralized structure.
Macro Economics: The U.S.-China trade deal, which significantly reduces tariffs on both sides and establishes a 90-day pause in further tariff escalation, is being portrayed by Beijing as a major win, both domestically and internationally. The agreement, reached after tough negotiations in Switzerland, lowers U.S. tariffs on Chinese goods from 145% to 30% and Chinese countertariffs from 125% to 10%, providing immediate relief to bilateral trade and boosting global stock markets. While the deal has eased tensions in the ongoing trade war and offered hope for more stable economic relations, concerns remain over China’s long-term commitment to substantive reforms, as past negotiations have often resulted in limited follow-through. Overall, the truce has given a temporary boost to global economic confidence and trade flows, but lasting macroeconomic benefits will depend on future agreements and the resolution of underlying structural issues.
Meanwhile, China risks spiraling deeper into deflation as it tries to divert consumption to the domestic market. By encouraging exporters to offload surplus goods at substantial discounts within China, authorities risk exacerbating deflationary pressures, intensifying price wars, and further squeezing corporate profitability—all at a time when consumption and confidence are already weak. Economists warn that this stopgap may only deepen excess capacity and lower consumer and wholesale prices, eroding margins and threatening jobs. As a result, economic forecasts now predict near-zero consumer inflation for China, ongoing declines in wholesale prices, and muted GDP growth, even as authorities have set ambitious growth targets and remain cautious about more significant stimulus moves.
Equities: In a remarkable turnaround, US stocks rose on Tuesday following April’s Consumer Price Index report, which showed the slowest annual inflation rate since 2021 and helped ease concerns over immediate price hikes, despite ongoing uncertainty from President Trump's tariffs. The S&P 500 surged 0.9%, putting it on track to wipe out year-to-date 2025 losses after Monday’s impressive 3.3% jump, while the tech-heavy Nasdaq Composite gained 1.7% amid renewed optimism from the US-China trade truce. In contrast, the Dow Jones Industrial Average slipped 0.3% as a sharp plunge in UnitedHealth’s shares dragged it down; UnitedHealth suffered about a 10% loss after suspending its 2025 guidance and announcing the sudden departure of CEO Andrew Witty, blaming rising costs. Other healthcare stocks, including Humana, also declined. Meanwhile, markets are now betting on the Fed’s first interest rate cut coming in September rather than June. Major firms continue to voice concerns about tariffs, with Honda warning of a $3 billion profit hit from new US auto duties. Overall, the positive inflation data buoyed most of Wall Street, even as significant headwinds remain in the form of trade policy and sector-specific shocks.
The Fed and US Treasury: President Donald Trump is calling on the Federal Reserve to cut interest rates, claiming that inflation is down and U.S. prices for essentials like gas and groceries have fallen. However, despite recent stabilization of inflation, which fell to 2.3% in April, economists warn that Trump’s ongoing tariffs on imports, especially from China, are likely to reignite inflation in the coming months. These tariffs, which have pushed average import taxes to 18%, are expected to cause prices to rise again, particularly for goods like clothing, electronics, and automobiles. As a result, the Fed is hesitant to cut rates, with market expectations for a rate cut dropping sharply since Trump took office, as higher inflation risks require keeping interest rates elevated. While Trump urges the Fed to act, the central bank remains cautious, waiting for clear signs that inflation will not rebound as a consequence of these policy choices.
Geopolitical: The White House announced a landmark $600 billion investment commitment from Saudi Arabia into the United States, highlighted by nearly $142 billion in defense deals and substantial investments in digital infrastructure, AI, and technology from major companies such as DataVolt, Google, Oracle, Salesforce, AMD, and Uber. This infusion, part of a broader U.S.-Saudi partnership targeting $1 trillion in bilateral cooperation, is poised to significantly boost U.S. economic growth and job creation across multiple sectors, particularly defense and high-tech industries. While these deals could reinforce U.S. economic stability and technological leadership, economists caution that Saudi Arabia may struggle to fully deliver on its ambitious commitments due to domestic fiscal pressures and declining oil revenues, which could impact the realization and scale of these macroeconomic benefits.
In a news conference, President Trump also stated that while he does not believe in having permanent enemies, he is willing to make a deal with Iran if it leads to regional and global security, but warned that continued aggression from Iran would result in severe pressure to prevent them from obtaining nuclear weapons. On Syria, Trump announced steps toward restoring normal relations for the first time in over a decade, arguing that past sanctions were necessary but now it is time for Syria to move forward and demonstrate positive change.
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Crypto Markets: Strengthening Fundamentals
The crypto markets remain resilient, poised to surge higher on any positive developments. Bitcoin supply continues to tighten as larger wallets steadily accumulate and hold their assets. Meanwhile, investment in crypto businesses is accelerating, highlighted by major deals like Robinhood’s recent acquisition of WonderFi. Against this backdrop, bullish sentiment is hard to resist, especially with prediction markets now placing a 32% probability on Bitcoin reaching $150,000 by 2026, in line with our EOY 2024 outlook for the asset.
Inflation and Tariff Uncertainty
In traditional financial markets, April’s Consumer Price Index (CPI) report showed an annual inflation rate of 2.3%, a softer figure than many had expected. While the tame CPI reading offered some relief, market watchers remain cautious. The potential inflationary impact of Trump-era tariffs, despite recent rollbacks, continues to loom as an unpredictable factor that could complicate the inflation outlook. It is still our view that the natural bilateral rate for tariffs is 0%, assuming safeguards around exploitive work practices are accounted for. While the world is far away from here, normalization of trading relationships with China is a promising sign, even if temporary.
While the Trump administration touts the China tariff deal as a victory, it is likely that China sees de-escalation as being in its own national interest. Although opinions differ on which country will lose more in the trade war, it is evident that China stands to benefit most by avoiding further conflict. In response to recent tensions, China is actively restructuring its supply chains to reduce dependency on foreign technology and resources. Meanwhile, global trends reveal a growing acceptance of state intervention in markets. Overall, the international landscape remains marked by persistent uncertainty, as nationalism, geopolitical competition, and state-driven economic policies increasingly shape the emerging world order.
Navigating the New Market Landscape
With crypto momentum building and inflation risks in flux, investors face a landscape shaped by tightening Bitcoin supply, growing institutional confidence, and shifting economic policy. The result is a market environment where optimism around Bitcoin's future seems increasingly justified, even as broader financial uncertainties persist.
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The 1Konto Team
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