Bitcoin has been enduring a rocky season this May, marking a first since July 2021 when less than 800,000 unique Bitcoin addresses engaged in daily transactions on the blockchain. This dwindling activity correlates with a market-wide correction currently impacting Bitcoin and other digital currencies.
However, an intriguing aspect of this downturn is the resilience of Bitcoin’s price, which despite the reduced transaction rate, continues to maintain a relatively high standing, without dropping off the crucial resistance level of $25,000 as many expected.
Prepare For A Chaotic Mid-May
A salient headline is another rate hike by the Federal Reserve, initiated as U.S. non-farm payrolls marginally exceeded expectations. As we enter the latter half of the month, speculation rife, the question looms – are the bulls preparing to charge back into the market?
Bitcoin, despite a promising April, had stumbled to a two-month low by mid-May. This bearish shift in market sentiment was not entirely unexpected given the short time frame in which several key data releases occurred, thereby injecting a level of price uncertainty into the mix.
Monetary Policy Moves and Market Implications
In a bid to steady the economy, the Fed has hiked interest rates by 25 basis points, following a rise in non-farm payrolls to 253,000, compared to an anticipated 180,000.
Subsequently, inflation recorded a decrease to 4.9% in April, leaving market observers uncertain about the Federal Reserve’s potential moves during the upcoming June meeting.
Is The Future Bleak?
While some pundits suggest Bitcoin might witness a capital influx if the United States defaults on its debt, the imminent risk of the U.S. Treasury depleting its funds threatens to strain liquidity.
Crypto prices, which still have a high correlation with traditional indices like the Dow and S&P 500, face a potential downturn if major banks’ prediction of a steep U.S. recession in 2023 comes to pass.
Bitcoin is trading at $27,365 at the time of writing this article.