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Since 2011, Bitcoin (BTC) has recorded an average return of 18.3% in May, according to data presented by bitcoinmonthlyreturn.com.
But two of the three worst Mays in Bitcoin’s history have occurred in the last two years.
In May 2021, Bitcoin lost a staggering 35.38% of its value.
In May 2022, Bitcoin fell 15.56%, albeit more modestly.
And it wasn’t the best start to May 2023.
Bitcoin’s price has already dropped by about 2.0%, and BTC/USD was the last to trade on major exchanges in the $28,600 range.
Still, cryptocurrencies are up about 73% year-on-year.
However, traders worry that history could repeat itself again and Bitcoin could lose a significant chunk of its value between now and the end of the month.
Macro risks certainly have the potential to weigh on the price of Bitcoin.
of US Federal Reserve System Latest Policy Decision Announced Wednesday – With 10 consecutive rate hikes expected (at 25 bps, rates will range from 5.0 to 5.25%), Fed Chairman Jerome Powell warns financial markets that the Fed will hike rates. It is expected to refute expectations of a rate cut later this year.
For now, inflation remains high and a still strong US labor market justifies continued tightening.
If upcoming US employment and inflation data are strong enough, there is a risk that US dollar and US yields could rise and hit Bitcoin, despite market expectations for a rate cut later this year. .
Meanwhile, U.S. liquidity continues to decline after the surge in March when the Federal Reserve launched liquidity support to the banking sector, pointing to further potential macro tailwinds for Bitcoin.
Are Banking Crisis/US Debt Default Fears Helping?
Bitcoin is currently above the $28,200s 50-day moving average, suggesting the market’s short-term bullish momentum is still there, but risks falling below the $26,500-$27,000 support is still serious.
A breakout of this support zone would open the door for a possible retest from the key long-term support to resistance area near $25,250 to $400.
But one significant macro tailwind could save Bitcoin, perhaps even push it to an annual high in the $30,000s.
This is a resurgence of concern over the US banking crisis.
Collapsed regional bank First Republic fell into FDIC control over the weekend and was swiftly sold to US bank JP Morgan via auction.
First Republic’s collapse followed the collapse of three other US regional banks in March.
The KBW Regional Banks Index fell 5.5% on Tuesday, its biggest intraday drop since concerns of a banking crisis first emerged in early/mid-March and its lowest level since late 2020.
Investors worry that a series of more local banks may be about to implode, putting the broader US financial system at risk.
In March, concerns about a banking crisis created a safe haven demand for bitcoin as investors sought out another independent, decentralized currency.
In fact, Bitcoin rose more than 2.0% on Tuesday. Analysts cite bank-related safe-haven bids.
Even if U.S. regulators manage to avoid a full-blown banking crisis, recent events significantly increase the risk of recession through contraction in bank lending (as banks become more cautious). excessive conditions.
This should also serve as a long-term macro tailwind for Bitcoin.
Another factor that could support bitcoin prices in May is the rising risk of US sovereign debt default.
US lawmakers are currently fighting over the terms of raising the US debt ceiling.
If they don’t do so before the US Treasury runs out of cash (perhaps in June), the US government could default (because the US government tends to fund overdue debt through issuance). of new debt).
We’ve been through this merry-go-round dozens of times before, and so far there have always been last-minute deals to avoid defaults.
However, with the deadline to raise the debt ceiling looming and the odds of default seen looming, we may see a safe flow of funds into Bitcoin.
Because a default would be devastating to the US government and the credibility of its currency, the US dollar. It is currently the world’s key currency.
Investors looking for alternatives to hard money may flock to gold (the oldest form of currency) and Bitcoin (what many call the new digital gold).