The saying "sell in May and go away" that applies to stock markets has also applied to the crypto market this year. Although May is not over yet, sales were dominant in the first three weeks of the month.
In May of 2021, Bitcoin had dropped 35%. Bitcoin fell 15% in May 2022. And in the current May, Bitcoin declined by 8%. Can we say that May does not like crypto enthusiasts? Bitcoin has regressed in six May months of the last ten years and has risen only in the four. If past statistics are cited as a measure, we should declare September the unluckiest month. Since 2017, Bitcoin prices have decreased every September without exception.
The weak outlook in the crypto market started in mid-April. Since then, the correlation between Bitcoin and the Nasdaq 100 has weakened. In the chart below, the green line shows the Bitcoin Nadaq 100 correlation.
Contrary to the crypto market, the Nasdaq has risen slightly in the last month. The chart above shows that the Nasdaq 100, shown in blue, has been growing steadily since the beginning of the year. However, Bitcoin has been regressing since last month after a rapid rise.
I attribute the weakening of the correlation between Bitcoin and the Nasdaq to the decrease in the influence of the FED on the market. In the past, whenever the FED took a hawkish stance, the crypto market became correlated with the stock market. The crypto market has been moving in line with its dynamics for the last month. Unfortunately, prices are trending downwards, unlike the 2020-2021 period.
Expectations
The start of the bear market in 2022 was caused by rising inflation. Central banks announced they would raise interest rates to control high inflation and gradually increase interest rates. The FED took a firm stance in fighting inflation and managed to control inflation in the USA. The chart below shows US inflation as measured daily by truflation.com. There is a clear downward trend in inflation; as of yesterday, inflation in the US has regressed to 3%.
Official end-April inflation in the USA was announced as 4.9%. It means that when the official May inflation will decrease significantly. Official data will probably be over 3%. Still, I guess the Fed officials won't need another rate hike.
For the past year, analysts have repeatedly spoken of the rigidity of US inflation. The expected rigidity occurred in April, but then prices continued to fall. If the trend we observed in the chart above continues, we can see that the US inflation has dropped to two percent after two months. As @taskmaster4450 frequently states, technological developments increase productivity, creating a deflationary effect on economies. Thus, inflation declines rapidly when the money taps are slightly turned down. Maybe we have forgotten now, but before 2022, central banks of developed countries were trying to increase inflation to revive the economies.
The base scenario of this year in the crypto market was an increase in the first months of the year and then a decrease. Meanwhile, Bitcoin would absorb the market liquidity, and altcoins would lose value. The market has acted following this scenario so far, but there may be a surprise rise towards the end of summer.
24-25K is seen as the critical resistance zone for Bitcoin. Bitcoin has dropped to 26,600 three times in the past week and has risen slightly after the resistance at that level. Therefore, the price of Bitcoin may not even fall in the range of 24k-25k. After all, Bitcoin is still hovering above its 200-day average.
The Hive, on the other hand, is hovering below its 200-day average, which is not a good sign. Fortunately, this is not the case with Hive, as many altcoins suffer a similar fate. Likewise, Hive's place in the market value ranking has stayed the same for a long time.
TL;DR
We are living in a highly dull May. The years following the bear season probably have a mission to harass investors. The year 2019, following the bear market 2018, was not bright for altcoins. In 2015, following the bear market in 2014, the primary uptrend started in September.
Being a crypto investor during bear markets is psychologically challenging. On the other hand, we know that history is never repeated. I believe the next ascent will begin at an unexpected time. And I want to attend even the first days of a possible rally. I stocked up my coins and NFTs, waiting :)
Thank you for reading.
Cover Image Source: Midjourney App