What Happened?
In May 2025, the price of Bitcoin surged to near historical highs. Despite a decline in daily trading volume, the average transaction fee rose to $2.4, indicating strong market demand for limited block space. The U.S. spot Bitcoin ETF attracted over $2.8 billion in net inflows in the first half of May, bringing total assets to over $122 billion, reflecting significant interest from institutional investors. Meanwhile, the illiquid supply of Bitcoin reached an all-time high, suggesting a potential supply shock in the market. The Federal Reserve’s decision to maintain interest rates, coupled with inflation concerns triggered by tariff hikes, reinforced Bitcoin’s appeal as an inflation hedge. These macroeconomic factors, combined with ETF capital flows, jointly propelled Bitcoin’s recent surge.
Price Approaching Historical Highs, Transaction Fees Soar
Recent data shows that Bitcoin performed strongly in May 2025, with prices soaring and nearing historic highs, while transaction fees on the blockchain also increased, reflecting the ongoing demand for this leading cryptocurrency. Since early May, Bitcoin’s price has continued to rise. On May 18, Bitcoin’s price briefly reached around $106,000 and even surpassed this threshold on the 19th, approaching the record high of $108,786 set in January. Although there was a slight pullback afterward, it remains at a high level of around $104,500.
Alongside the price increase, the average transaction fee on the Bitcoin blockchain has also risen. According to data from The Block, the seven-day moving average transaction fee for Bitcoin has increased by about $1 since early May, reaching $2.4, marking the highest level of 2025. The average daily transaction volume peaked at 507,000 on April 22; however, it has since declined by 35% to 330,000. Yet, the rise in transaction fees seems to indicate that demand for limited block space is increasing.
Supply Tightening and Institutional Capital Influx
Analysis indicates that the “illiquid supply” of Bitcoin (the amount of Bitcoin in wallets with long-term inactivity) has reached an all-time high, signifying a decrease in the quantity of Bitcoin available for trading in the market. If demand continues to grow, this supply tightening could trigger further price increases. Concurrently, Bitcoin’s dominance in the cryptocurrency market is gradually rebounding, suggesting that the previous decline in Bitcoin’s market share does not represent a fundamental change in market structure (such as the onset of a long-term altcoin bull market), but rather a result of short-term capital movements within the market.
Additionally, the strong inflows into the U.S. spot Bitcoin ETF provide crucial momentum for this upward trend. In just the first half of May, the U.S. spot Bitcoin ETF saw over $2.8 billion in net inflows, with a single-day inflow of $674.9 million on May 2. By May 16, the cumulative inflow had reached $41.77 billion, with total assets exceeding $122 billion. Unlike past price increases driven by retail speculation, this surge in Bitcoin’s price is more supported by strong capital flows from ETFs, stable interest rate expectations, and renewed discussions surrounding inflation.
The macroeconomic backdrop also adds to Bitcoin’s performance. The U.S. Federal Reserve maintained its benchmark interest rate between 4.25% and 4.50%, adopting a cautious stance. However, inflation concerns have resurfaced, particularly with warnings from U.S. retailers like Walmart that trade tariffs could lead to future price increases of goods, enhancing Bitcoin’s allure as an inflation hedge.
Looking ahead, the market sentiment towards Bitcoin is generally optimistic. With increases in demand, tightening supply, and strong institutional capital inflows creating multiple favorable conditions, Bitcoin is positioned in a critical upward trajectory.
References: decrypt, the block