Bitcoin Declines 15 Percent in May — And More Pain Expected

Bitcoin’s price declined by 15.6 percent in May, the third-largest one-month decline since its last bull run began in May 2020.

The decline capped bitcoin’s second-worst two-month decline for the period, according to data compiled by CoinGlass. It was eclipsed only in May 2021 — when bitcoin fell from $57,000 to $37,000 (35.5 percent) just weeks after reaching an all-time high, and in April, when it fell from $45,500 to $38,600 (24.92 percent).

The price bottomed this month at $26,900, a decline of 30 percent. A last-minute bounce over the Memorial Day weekend from the $28,000 range helped to salvage the number.

Analysts largely expected the price to continue rising into June, despite expectations of a larger downtrend in the months ahead. The Fear & Greed Index stood at 16 as of market close, indicating “extreme” fear by most investors.

Anecdotally, 67 percent of users in one Twitter poll said they believed the swing up was a “bull trap” — an effort to trap optimistic investors.

Wide disbelief in the rally provides a compelling incentive for larger market players to continue driving the price up in order to force “sidelined” investors — those who have taken their money out of the market — to put their cash back on the table. That typically doesn’t happen until they see the price rise credibly enough to believe that any downtrend is in the rearview mirror.

The pessimism comes after bitcoin fell more than 50 percent from an all-time high of $69,000 last year. Forecasters say technical indicators show the price could flare up as much as 20 to 30 percent more this month — to a total of $38,000 and $42,600 — before continuing its downward march.

$BTC closed decisively above its 20 DMA yesterday confirming that it made a daily and weekly cycle low on May 12. Judging by the last weekly high, the target for the next daily and weekly cycle high could be as high as the 200 DMA and at least the 100 DMA. pic.twitter.com/2OavgQ5Gxy

— CyclesFan (@CyclesFan) May 31, 2022

Personally think this is the path for $BTC if things go well

33-35k for upside then back to the lows

As what I view as highest probability currently pic.twitter.com/woW45XqReo

— Pentoshi 🔺 (@Pentosh1) May 30, 2022

Cryptocurrency prices have coincided with markets more broadly — the Nasdaq and S&P 500 similarly reached 52-week lows in May — which have been hammered by Central Banks seeking to rein in inflation. Analysts have suggested stock markets could fall by as much as 20 percent more by the end of the year.

Policy considerations could nonetheless throw a wrench into the prediction market. President Joe Biden met with Federal Reserve Chairman Jerome Powell on Tuesday to discuss “inflation,” weeks after the Fed by half a percentage point — or 50 basis points (BPS) in — the highest in two decades. The consequent economic contraction stands to undermine Biden’s party in midterm elections unless Powell suspends the Fed’s effort relentless effort to drive down economic activity.

Prior to Tuesday’s meeting, the Fed was widely expected to hike rates by another half-point when it convenes on June 15. Fed Governor Christopher Waller said Monday he supported similar rate hikes at “every” Fed meeting until we see substantial reductions in inflation.”

Once the downtrend resumes, prognosticators expect bitcoin’s price to bottom out somewhere below $20,000, a level it hasn’t seen since 2020.

“I am a buyer at Bitcoin $20,000 and Ether $1,300,” 100x and crypto-exchange Bitmex co-founder Arthur Hayes, wrote in a May article published on Medium. “These levels roughly correspond to the all-time highs of each asset during the 2017/18 bull market.

“I did not expect the market to trade through these levels so quickly,” he added. “This meltdown happened less than one week after the Fed raised rates to the expected 50bps. Let me repeat the pertinent fact that the market EXPECTED a 50bps hike, and still puked afterwards. This market cannot handle rising nominal rates. It astounds me that anyone can believe long duration risk assets at all-time-high price multiples will not succumb to rising nominal rates.”