· As the dual drive of macro demand and regulatory benefits continues to push the crypto bull market, Bitcoin price reached a historical high in May 2025.
· Investor demand for Bitcoin is partly driven by U.S. macroeconomic imbalances, including ongoing fiscal deficits. While deficits are not a new phenomenon, the comprehensive tax and spending bill currently progressing through Congress is likely to keep the U.S. on an unsustainable fiscal path.
· U.S. fiscal risks seem to be generating Bitcoin demand, as evidenced by the rise of "Bitcoin Treasury" companies (listed companies holding Bitcoin on their balance sheets). The valuation premium these companies receive indicates broad interest from traditional stock market investors in crypto asset allocation. However, we believe that "crypto treasury" strategies for tokens beyond Bitcoin have limitations, as investors will ultimately be able to obtain more allocation channels through spot crypto trading platform products (ETPs).
· Other progress this month includes: breakthroughs in stablecoin and market structure legislation; outstanding performance by decentralized trading platform Hyperliquid; and Worldcoin, a blockchain-based identity verification project, appearing on the cover of Time magazine.
With a temporary easing of tariff conflicts between the U.S. and China, the stock market rebounded in May. However, this rise occurred after three consecutive months of decline, with the S&P 500 still about 4% below its peak. Compared to the relatively healthy stock market, the bond market (especially high-quality sectors) showed negative returns, seemingly due to government high deficits and corresponding long-term government bond issuance. According to the market-cap-weighted FTSE Grayscale Crypto Sector Index, Bitcoin and the entire crypto asset class have risk-adjusted returns comparable to global stocks (Figure 1). Bitcoin rose 11% this month, reaching a historical high of $112,000; ETH, the native token of the Ethereum blockchain, rose 44%, partially recovering its previous underperformance relative to Bitcoin.
The Big Beautiful Bill
Bitcoin demand tends to rise when investors doubt the credibility of fiat currency systems. In May, this concern was again in focus. On May 22, the U.S. House of Representatives passed the comprehensive tax and spending bill now officially named OBBBA (One Big Beautiful Bill Act). Budget experts estimate that if implemented according to current provisions, the bill will increase federal deficit by approximately $3 trillion over the next 10 years; if certain expiring provisions are extended, the deficit could reach $5 trillion. If the bill takes effect, its revenue and expenditure composition will put the U.S. national debt on an unsustainable path (Figure 2). Partly due to the U.S. fiscal policy direction, Moody's downgraded the U.S. sovereign credit rating from AAA to AA on May 16. While the U.S. government will not default in the short term, an unsustainable debt path increases long-term risks of macroeconomic mismanagement, thereby enhancing investor interest in non-sovereign value storage methods like gold and Bitcoin.
Surge in Crypto Treasury Companies
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Although ETH has performed strongly this month, the most outstanding performer among large assets with a market cap over $5 billion is the HYPE token from Hyperliquid. Hyperliquid is both a professional perpetual contract decentralized exchange (DEX) and a general smart contract platform. The chain's Hypercore product currently accounts for over 80% of on-chain perpetual contract trading volume. During May, Hypercore's perpetual contract trading volume exceeded $17 billion, and its daily revenue at the end of the month even surpassed the three major smart contract platforms of Ethereum, TRON, and Solana (based on fee income) (Figure 6). Last year, the protocol set a record for the largest airdrop in crypto history—calculated at over $8 billion at current prices—prompting the entire industry to rethink token economics and financing models without venture capital support. Hyperliquid has consistently maintained high natural usage and strong liquidity, and will increasingly compete with centralized derivatives trading platforms like Binance and Bybit in the future.
AI Crypto Sector Performance
With the rapid development of blockchain AI technology, Grayscale Research recently added an "Artificial Intelligence Crypto Sector," becoming the sixth independent sector in our crypto industry classification framework. Currently, this sector contains 20 tokens with a total market cap of around $20 billion (Figure 7).
Notable projects making significant progress in this sector include Worldcoin—an identity network founded by Sam Altman aimed at establishing a "proof of humanity" system to address the increasingly serious human/robot identification challenges in the AI era. This month, Worldcoin announced an important milestone: completing a $135 million financing through public market acquisitions of WLD tokens by a16z and Bain Capital Crypto. The project has attracted widespread attention through measures such as appearing on the cover of Time magazine, promoting the iris scanning device "Orb" in the US market, and launching the World App crypto wallet. Other important developments in the blockchain AI field include rising attention to Bittensor's subnet, and top stablecoin issuer Tether disclosing plans to launch an AI agent network based on a crypto-native architecture.
In the coming months, the crypto market is likely to continue its current driving logic: Bitcoin's macro demand driven by stagflation risks and tariff uncertainties, continued improvement of regulatory environments in the US and overseas, and technological innovations in areas like blockchain AI. This asset class has performed excellently over the past two years, and the supporting factors of fundamental improvements still exist.
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