The cryptocurrency market suffered a setback earlier this month, with Bitcoin falling more than 20% from a $73,750 high in March to $56,700 on May 1. This sparked a sharp selloff in altcoins, with dips of up to 40% recorded in the 24-hour timeframe. Ethereum, the largest altcoin, fell by more than 15% from its yearly highs and slipped below the critical $3,000 level.
While some analysts assured that shakeouts like this are normal during a bull run, others raised concerns about increased volatility and downside risks. The market has since made a recovery, with Bitcoin trading above $63,600 at the time of press (May 6) and Ethereum hovering above $3100.
What Happened?
On April 30, Bitcoin fell below $60,000 for the first time since early March, triggering a wider market selloff. The leading cryptocurrency fell below the average cost basis for spot Bitcoin ETFs, which had been set at $59,000. Bitfinex’s head of derivatives, Jag Kooner, predicted further downside to $50,000, which would result in the liquidation of over $750 million in leveraged long positions.
Another well-known analyst, Rekt Capital, noted that this was the deepest pullback of the current cycle, surpassing the 22.9% pullback in early 2023. Looking back in history, we find that Bitcoin has had far worse corrections during previous bull markets, and there were as many as five corrections of more than 30% experienced during the 2018 rally.
Impactful Events in the Crypto Industry
May’s gloomy market mood has been exacerbated by the recent sentencing of former Binance CEO Changpeng Zhao for violating money-laundering regulations. The fall of such a leader in the field of cryptocurrency, who had led the charge for the space before surrendering last year and pleading guilty, has led to his landing behind bars for four months.
However, one positive sign is the trend where Allure Resource Partners, a leading coal mining firm, reports that it has been mining Bitcoin since 2020, using the surplus electricity at its facilities. As of Q1 2024, ARLP has 425 BTC on its books, worth $30 million.
What’s to Come
The ETH ETF Decision
One of the biggest events awaited for May is spot Ethereum ETF filings from top applicants like VanEck and ARK Invest. However, there has been a lot of scepticism, with many industry experts, including Micro Startegy’s Michael Saylor, stating that the SEC will most likely not approve an ETH ETF in the US on May 23.
A green signal for a spot ETH ETF would instead likely catalyze a new wave of institutional investment and further drive the adoption of Ethereum. On the other hand, a rejection could lead to a realignment in market sentiment and trigger a sell-off across the broader crypto market.
Other Core Events for Crypto in May
In addition to the spot ETH ETF decision, a few other pivotal events have a good chance to put pressure on the crypto landscape in May. The verdict from the ongoing Tornado Cash trial, where developer Alexey Pertsev has been on the stand for money laundering, will help determine a precedent for any regulatory scrutiny on privacy-focused tools within the ecosystem. The crypto community is sure to watch this decision with bated breath, as far-reaching implications for the development and use of privacy-enhancing technologies in the industry are at hand.
Another significant event is the April CPI report, which will be published on May 15. The CPI report has the potential to redefine the stance of the Federal Reserve regarding its monetary policy, largely because if it surprises and deviates significantly from expectations, it can ensure the most appropriate adjustment in interest rates. Directly, this policy would affect market stability and the feelings of investors within the crypto space.
Also, the decision of the SEC on May 29, whether to approve or reject options trading for spot Bitcoin ETFs, really will have a significant impact on the industry. The fact is, such an approval might even open the doors for increased institutional participation and further adoption of cryptocurrencies. However, a rejection could drag the market sentiment and might well trigger a sell-off across the broader crypto market.
A second such event is the much-anticipated Bitcoin Asia Conference, coming up in Hong Kong on May 9-10. The conference will gather some of the leading lights in the crypto and traditional financial sectors and could well reveal some significant market trend-making or insights, especially if the conference takes place under the umbrella of Hong Kong’s support for spot Bitcoin and Ethereum ETFs.
Conclusion
As May progresses, the cryptocurrency market experiences choppy market conditions. A confluence of factors predicts short-term volatility with potential drawdowns, but the industry’s long-term prospects look promising. Nonetheless, the cryptocurrency industry has faced difficulties in the past, and it will be interesting to see how it navigates a “Stormy Crypto May.”
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