Bitcoin has officially entered price discovery mode, breaking its May high as bearish indicators failed to contain ETF-led flows, growing corporate balance sheet adoption, and macro tailwinds. Traders who bet against the breakout are now fueling the rally’s next leg.

On July 9, Bitcoin btc2.42%Bitcoin surged over 2% to trade just above its prior all-time high of $111,970 set in May. The rally defied a wall of skepticism: short interest had climbed to $35 billion ahead of the move, while technical indicators flashed bearish divergences.

Bitcoin’s all-time high could be seen as confirmation that institutional capital flows, not retail leverage, now dictate crypto’s inflection points. The original cryptocurrency entered into the uncharted territory amid a macro environment clouded by hawkish labor data and a sudden drop in rate-cut expectations, defying short-term bearish sentiment that had gripped markets earlier in the week.

Institutional tsunami, macro tailwinds defy bearish resistance

Bitcoin’s breakout comes at a time when the traditional drivers of crypto rallies, such as halving narratives and speculative retail euphoria, have been sidelined by more durable capital flows.

What appeared as counterintuitive price action, when BTC soared despite cooling rate-cut bets and rising short positions, reveals a fundamental market shift. The $35 billion in open short interest that accumulated ahead of the breakout became fuel for the rally, as ETF inflows and corporate buying created a supply squeeze that forced bears to cover positions.

Data shows spot Bitcoin ETFs absorbed 245,000 BTC in Q2 alone, equivalent to nearly 1% of the total supply, while public companies beyond Strategy aggressively added billions in Bitcoin to their balance sheets. Standard Chartered analysts call this a “new flow regime,” where institutional absorption outpaces new supply from miners by a 3:1 margin.

At the same time, broader risk markets have firmed around a surprisingly resilient U.S. economy. The June nonfarm payrolls report came in well above expectations, with 147,000 jobs added and the unemployment rate falling to 4.1%.

That data prompted a sharp repricing in interest rate expectations. CME FedWatch now shows just a 5% chance of a July cut, down from 24% earlier this week. While tighter policy would typically pressure risk assets, Bitcoin’s rise alongside equities suggests it’s being repriced less as a high-beta asset and more as a liquidity magnet in a capital-constrained world.

The S&P 500 and Nasdaq also gained on Wednesday, with the Dow adding 164 points, or 0.4%.

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Favorable geopolitics?

Geopolitics added unexpected tailwinds. On July 9, the Trump administration fired warning shots at six nations, slapping Algeria and Iraq with 30% tariffs, while Brunei, Libya, and Moldova face 25% duties, and the Philippines braces for 20%.

This marks the latest escalation in a broader tariff offensive, following threats against Japan and South Korea earlier in the week. Historically, such measures trigger inflation, supply chain disruptions, and equity sell-offs. But Bitcoin’s eerie calm suggests traders aren’t panicking, at least not yet.

According to CoinShares’ James Butterfill, that may be a temporary illusion. “In the short term, tariffs slow growth and spook risk assets, including Bitcoin,” he noted in a report earlier this year.

Nansen’s Nicolai Sondergaard cautions against overreading the frenzy. “Increased tariff announcements will likely spook the market,” he told crypto.news, “but players are conditioned to expect last-minute deals.” The real test comes August 1, and if tariffs take effect, Bitcoin’s rangebound complacency could shatter.