Bitcoin experienced its first monthly loss of 2023 in May following several solid months of growth due to macroeconomic uncertainty.
Bitcoin Had Its Worst Month of 2023 in May
The world’s leading digital currency by market capitalization was about two percent lower at the end of May given that many central banks were continuing to support stronger rate hikes as inflation has still not died down in leading countries such as the United States or the United Kingdom. Thus far, the Fed has hiked borrowing costs about ten consecutive times since March of last year.
Sadly, the patterns are not expected to stop, and many believe 2023 will be a year of continued, steady rate hikes. Birgham Santos – COO of blockchain financial services provider Lama – explained in a recent interview:
When there is fear sentiment in the market, investors tend to flock to safer assets, such as gold and government bonds. This can lead to a sell-off in riskier assets, including bitcoin. In addition, central bank tightening can also lead to a decline in bitcoin prices. This could work as a domino effect by generating higher interest rates, which can make it harder to borrow money to invest back [into] bitcoin.
The interesting thing is that bitcoin appears to be unique at the time of this writing… Unique in that it’s one of the only main cryptocurrencies out there affected by the news of the allegedly incoming (and continued) rate hikes. While altcoins like Solana have also taken dives, Ethereum, by contrast, ended May at about two percent higher than where it was during the previous month, thus showing inflation worries aren’t being felt across the board.
Ben Caselin – vice president and chief strategy officer at crypto exchange Mask EX – mentioned:
There’s no doubt that bitcoin’s price, as well as wider crypto market movements, are directly impacted by the US Federal Reserve and central bank policies. It is, after all, in response to central banking that bitcoin was created in the first place.
Still Up from 2022
While the news regarding bitcoin may not be the best, things are still looking up for the currency given it’s about 65 percent higher than where it stood at the end of 2022. Santos continued with:
Whilst there are multiple external factors that can stall the crypto market, such as regulation, monetary policies, and geopolitical events creating uncertainty and fear in the behavior of institutional investors, there is also a massive adoption in the market. This means more users, more use cases, more innovation, and more value creation… Mid and long-term signals are looking good as mass adoption is increasing, and this is what ultimately defines the price.
Bitcoin is presently trading in the high $27K range, and it’s believed the asset will gain traction during the coming months.