Bitcoin is approaching $120,000 as the crypto market frenzy heats up. Where is the rise logic?

The fall without reason is frustrating, but the rise without reason is also worrisome.

In the past two days, the cryptocurrency market has caught a whiff of a "bull" trend. Not only has Bitcoin continued to rise, breaking through $118,000 and constantly setting new historical highs, but ETH has also been rejuvenated, rising all the way past $3,000, becoming the leader in the crypto market. Overall, the cryptocurrency market is showing a trend of overall upward movement, with the total market capitalization reaching $3.7 trillion, rising more than 1% within 24 hours.

The market is enjoying the sweet rain of a rise, but is also questioning the reason for the rise, as no one wants to be lured into standing guard on the high mountain by false prosperity. But the problem seems to lie here: what exactly is the logic behind this round of rise?

Where is the benefit?

In fact, finding the real reason for the rise is as absurd as proving "your mom is your mom"; attribution is essentially a false correlation. However, the market is more accustomed to the operational logic that there is a cause for every effect. Nevertheless, the changes in the macro environment seem limited, and individual events have too little driving force. If we want to link it to a cause, perhaps the only explanation is multi-factor resonance.

From the perspective of the old adage about the macro environment, there are mixed feelings, and uncertainty still exists. Countries around the world are still battling over tariffs, with the U.S. tariff letters being gradually published, causing anxiety among many nations. However, as tariffs become a commonly used weapon, the global market has developed a sense of familiarity with this tool; despite the stick still being waved, it no longer incites panic like the Liberation Day did. On the other hand, shifting the focus back to the U.S., according to data released by the U.S. Labor Department on the 3rd, the non-farm payrolls in the U.S. added 147,000 jobs in June, with an unemployment rate of 4.1%, a decrease of 0.1 percentage points month-on-month. The employment data is significantly better than market expectations, further reducing the possibility of a Federal Reserve rate cut. The latest CME "FedWatch" data shows that the probability of the Federal Reserve maintaining interest rates in July is as high as 95.3%.

Fortunately, although the probability of interest rate cuts has been declining recently, the medium- to long-term probability of rate cuts continues to rise. In addition to Trump once again making waves on social media, Federal Reserve Governor Waller, one of the frontrunners for the next Fed chair, clearly stated that the Fed should discuss the issue of rate cuts at the July meeting. San Francisco Federal Reserve Bank President Daly also expressed support for two rate cuts within the year. Although there has not yet been a more unified opinion on rate cuts, the apparent division of consensus among committee members reflects that this process is accelerating.

From an industry perspective, the overall positive trend continues. In terms of regulation, significant bills have made corresponding progress, with the Stablecoin Innovation Act just a step away from being sent to the President, while the "U.S. Digital Asset Market Structure Bill" has also begun its journey through the Senate. The approval of altcoin ETFs has also seen a glimmer of hope, although the SEC has not yet successfully approved any altcoin ETF. However, according to crypto journalist Eleanor Terrett, the SEC is collaborating with various trading platforms to formulate a universal listing standard for cryptocurrency ETFs, which is still in its early stages. If a cryptocurrency meets the standard, issuers can bypass the 19b-4 process and directly submit an S-1 filing, waiting 75 days for the trading platform to list it. This method can save issuers and the SEC a significant amount of paperwork and time spent on repeated consultations.

The new regulatory cycle has opened up, giving rise to strong institutional demand. First, the continuous inflow of existing Bitcoin and Ethereum ETFs shows a positive attitude from institutions. On July 9, the net inflow of Bitcoin spot ETFs was $218 million, and the net inflow of Ethereum spot ETFs was $211 million, with both experiencing net inflows for 5 and 4 consecutive days, respectively. Second, the recent surge of listed companies in the "crypto vault" trend has been remarkable, with Metaplanet and Murano from the hotel industry, Semler Scientific and DDC from the cultural and healthcare industries, and even manufacturers and tech companies starting to lay out strategies, all following the Strategy model to build unique cryptocurrency reserve strategies. The reserve range spans from Bitcoin to Ethereum and continues to expand to a wider variety of coins like BNB, SOL, and XRP, driven by real capital obtained through convertible bonds, which has propelled the growth of the crypto market. According to Keyrock, the group of companies led by Strategy currently holds 725,000 Bitcoins, with Strategy holding 597,000, accounting for approximately 3.6% of the total Bitcoin supply.

From the perspective of external events, foreseeable interest rate cuts, the regulatory opening cycle, and the frenzy of institutional purchases have driven a positive fundamental outlook. However, from a data perspective, the reasons for the rise are even more intriguing. Although both BTC and ETH have broken new highs, it is not due to a surge in volume; the trading volume remains quite average. On the other hand, the data on exchange reserves continues to decline, with the speed of decline significantly accelerating during the recent week-long rise. Correspondingly, the number of long-term holders is increasing. ARK Invest's latest "Bitcoin Monthly Report" points out that the total amount of Bitcoin held by long-term holders has now reached 74% of the total supply, marking a new high in the past 15 years.

From this perspective, the reason for the rise seems quite simple - there are fewer sell orders. Buyers are gradually increasing, but those willing to sell are decreasing, and some sellers even have a tendency to hold onto their coins, resulting in a price increase, although the trading volume has not increased. The turnover rate also reflects this point; the Bitcoin turnover rate in the past 24 hours has reached a new high in the last 7 days, but it is only 3.51, indicating limited trading activity. However, from a positive perspective, low activity and concentrated holdings may actually perform stronger; from a support standpoint, the current Bitcoin holding range has further risen to $104,000 - $108,000. Glassnode's report also expresses a similar view, stating that the current price rebound of Bitcoin is mainly driven by leveraged funds, with insufficient spot demand. The core reason is that various investors are continuously tightening supply through strong accumulation, compressing market volatility, which makes the market unusually sensitive to any demand shocks.

Does the stock market drive the cryptocurrency market?

It is worth emphasizing that the correlation between the cryptocurrency market and the U.S. stock market is becoming tighter. As shown in the chart below, Bitcoin exhibits a high positive correlation with the market capitalization of U.S. stocks. From the data, it can be seen that the Nasdaq index and the S&P 500 both reached new highs in the past two days, which is very synchronized with the time when Bitcoin reached its new high. Furthermore, looking at individual stocks corresponding to BTC, Nvidia reached a market capitalization of $4 trillion on July 9, topping the U.S. stock market, which also reflects the consistent trend between cryptocurrencies and stocks. This seems to indicate that the risk market, including crypto assets, is entering a new round of easing.

An interesting phenomenon is that while Bitcoin continues to reach new highs, the market's enthusiasm is decreasing. Instead, people in the crypto circle are more focused on the price performance of Ethereum. The reason for this is that as Bitcoin has risen to such heights, it has created a divide based on price, making it difficult for retail investors to access. In contrast, Ethereum's ecological spillover effect is stronger, and many altcoins look to it as a benchmark. Currently, many altcoins are still down over 80% from their previous highs, which has naturally raised expectations for Ethereum. At present, influenced by positive factors such as staking and RWA, and considering the BTC/ETH exchange rate, ETH is still in an undervalued range. Today, ETH has returned to $3000, which is also traceable.

Interestingly, this round of the altcoin market seems to have also appeared in the stock market. With the rise of the crypto market, shell companies holding tokens have shown continuous improvement. As of today, stocks holding tokens have collectively risen, with the SOL version "MSTR" Upexi up over 3.2%, and the Ethereum version "MSTR" SharpLink Gaming up over 8%. Looking at the shell companies holding tokens, many of their main businesses are relatively bleak, relying solely on the premium of their token net value, becoming another form of "altcoin."

On the other hand, compared to the previous passive observation, this wave of cryptocurrency rise has had remarkable effects in both A-shares and Hong Kong stocks. The concept of stablecoins is thriving in the U.S., and A-shares and Hong Kong stocks naturally will not miss out on this hot trend. Since June, the stablecoin concept sector has been exceptionally active, with significant rises in stocks such as Jidatech, Huafeng Ultra Fiber, New Zhi Software, Sifang Jingchuang, and Hengbao Co., Ltd. Moreover, Puxing Energy surged due to news of "subscription for A-series preferred shares issued by HashKey Holdings," with an intraday increase exceeding 280% and a closing rise of 141%, demonstrating the market's enthusiasm for stablecoins and digital currencies. Just yesterday, the Shanghai Municipal State-owned Assets Supervision and Administration Commission held a central group study meeting to learn about the development trends and response strategies of cryptocurrencies and stablecoins. He Qing, Secretary and Director of the Commission, pointed out the need to adhere to innovation-driven approaches, maintain sensitivity to emerging technologies, and strengthen the research and exploration of digital currencies. It is foreseeable that the attention of local governments in China may provide more room for speculation and narrative around the concept of stablecoins.

Is there still controversy in the market?

Returning to the topic, whether it’s hype or betting, under the combined effects of macroeconomic recovery, favorable regulations, parallel stock markets, and institutional demand, the crypto market is objectively showing an upward trend, and the subsequent direction of the market has also become a focal point of heated discussion.

The vast majority of institutions and traders hold a very positive view, especially towards Ethereum. Today, Jack Yi, the founder of LDCapital, posted on social media stating that Ethereum's breakthrough of $3000 marks the official start of a bull market in the crypto industry. He also mentioned that he has released research reports multiple times since $1450, repeatedly emphasizing strong confidence and advising investors not to short.

Bitwise CIO Matt Hougan stated that the rise in Bitcoin prices is mainly due to relentless demand meeting limited supply, along with significant purchases by companies and ETFs. Additionally, he expects Bitcoin to break through $200,000 by the end of the year, with accelerated institutional and corporate funding driving prices sharply upward.

Trader Eugene posted in his personal community, stating, "Ethereum has only broken through $2800 three times in history, and each time after the breakthrough, the price quickly surged to around $4000. History doesn't simply repeat itself, but it often has similar rhymes. I will continue to hold my long positions, preparing for a wild journey." Trader AguilaTrades was more direct, increasing his 20x long position in Bitcoin to 3000 BTC on Hyperliquid.

Of course, in the face of the aggressive bull market, retail investors, who have been educated countless times before, are showing a very cautious attitude, with some even suggesting that such a sudden and intense rise may indicate a short squeeze. According to the funding rate data from Coinglass, mainstream exchanges mostly maintain a benchmark rate of 0.01%, reflecting that the market has not yet reached a fully bullish stage.

Being cautious in the current market is definitely a good thing, but from the perspective of the internal and external mechanisms combined, the probability of crypto assets entering a new cycle in the second half of the year is significantly increasing. The bull market that everyone is longing for may be just around the corner, but whether everyone's assets from the last bull market will return is still a big question mark.