Author: Huobi Growth Academy

summary

In early May 2026, the global crypto market exhibited extreme divergence and high uncertainty under the combined influence of three macroeconomic variables. Geopolitically, on May 4th, Trump announced the launch of the "Freedom Project" to escort merchant ships in the Strait of Hormuz, only to dramatically suspend it the following day, claiming "significant progress had been made on the US-Iran comprehensive agreement." However, Iran insisted it remained at war with the US and continued to close the strait, demanding all transit vessels obtain Iranian permission. Regarding the Federal Reserve, Warsh was scheduled to officially succeed Powell as chairman around May 15th, while the April 30th policy meeting remained unchanged as expected. The Beige Book showed that a sharp rise in energy prices had put comprehensive pressure on business costs across all 12 districts, prompting Goldman Sachs to subsequently raise its year-end core PCE forecast to 2.6%. Despite these macroeconomic headwinds, Bitcoin rebounded strongly from its early February low of $60,000, regaining the $80,000 mark, but the continued macroeconomic pressures made the consolidation of this rebound uncertain. Meanwhile, institutional behavior exhibited a rare "contrarian accumulation" characteristic: on May 1st, US spot BTC ETFs saw a net inflow of $630 million, with BlackRock's IBIT alone receiving $284 million and Fidelity's FBTC recording an inflow of $213 million. Overall, the struggle between macroeconomic pressures and institutional bullishness is entering a critical phase, and the market's direction will depend on the convergence of three major variables: geopolitics, the Federal Reserve, and institutional funds.

I. Geopolitical Game: The Reversal of the "Freedom Plan" in the Strait of Hormuz and the Resurgence of Inflation

On May 4, 2026, US President Trump announced on Truth Social that the US would officially launch the "Freedom Initiative" escort operation for merchant ships in the Strait of Hormuz that morning (Middle East time), deploying guided-missile destroyers, over 100 land-based and sea-based aircraft sorties, multi-domain unmanned platforms, and 15,000 active-duty military personnel. The US characterized it as a "defensive humanitarian operation," intending to circumvent the 60-day authorization period for presidential military actions under the US War Powers Act. However, just one day later, Trump announced that, given "significant progress on the US-Iran Joint Comprehensive Plan of Action," he had decided to suspend the implementation of the "Freedom Initiative," but emphasized that the naval blockade against Iran "would continue to be fully and effectively implemented." This dramatic reversal caught global markets off guard, with crude oil prices fluctuating wildly after the announcement.

Iran's stance is far tougher than that of the United States. Velayati, the foreign affairs advisor to Iran's Supreme Leader, explicitly stated that the Strait of Hormuz is closed and will not be reopened unless "the will of the Islamic Republic of Iran decides." All vessels planning to pass through the strait must submit an application via official email and obtain permission from Iran before passage. The chairman of the Iranian Parliament's National Security Committee warned that any foreign armed forces (especially the US military) approaching or entering the Strait of Hormuz will be attacked. The US and Iran have extremely clear differences in their positions on key issues such as the nature of the ceasefire, the right of passage through the strait, and whether the "Freedom Project" has been truly suspended. The market's pricing of geopolitical risks is far from being a time for relaxation.

The direct consequences of this geopolitical game are already beginning to emerge in global inflation data. Impacted by the escalating US-Iran military conflict and the UAE's withdrawal from the OPEC+ alliance on May 1st, international oil prices rose steadily from late April to early May, significantly driving up energy prices. Goldman Sachs subsequently raised its year-end core PCE inflation forecast from 2.5% to 2.6%, and its overall PCE forecast from 3.1% to 3.4%. More alarmingly, this inflationary pressure is not driven by overheated demand, but by supply-side shocks (oil prices) combined with tariffs. This complicates the Federal Reserve's monetary policy response mechanism—it is hesitant to raise interest rates (potentially exacerbating downward economic pressure) and unable to initiate rate cuts (the risk of inflation expectations decoupling is increasing). For Bitcoin, this "stagflationary" macroeconomic environment has historically exerted a two-way pressure: its safe-haven attributes have not yet gained widespread consensus, while expectations of liquidity contraction continue to suppress the valuation of risk assets.

II. On the eve of a change in leadership at the Federal Reserve: A crossroads between the Beige Book's warnings and policy independence

In mid-May 2026, the Federal Reserve will witness one of the most controversial chair changes in modern history: Kevin Warsh will officially succeed Jerome Powell as Chairman of the Federal Reserve. Breaking with 75 years of tradition, Powell will continue to serve as a member of the Federal Reserve Board of Governors after stepping down as Chairman. This arrangement is widely interpreted by the market as a political compromise of "not completely decoupling" between the White House and the Federal Reserve. Warsh's policy stance exhibits a subtle "hawkish-dove" characteristic: he is hawkish on inflation governance and balance sheet management, emphasizing monetary policy discipline and framework restructuring, and has publicly criticized the Fed's ultra-loose policies of the past 20 years as "seriously deviating from their mission"; however, he is dovish on the long-term interest rate path, acknowledging the natural inhibitory effect of technological progress on inflation and supporting rate cuts when data allows. This mixed stance has led to market divergence regarding the monetary policy path in the "Warsh era," becoming a key source of uncertainty in the macro pricing of the cryptocurrency market in May.

The Federal Reserve's policy meeting that concluded on April 30 was the last meeting chaired by Powell. As widely expected, the federal funds rate remained unchanged at 3.50% to 3.75%. The signals conveyed in the post-meeting statement and Powell's press conference were complex: on the one hand, the impact of rising energy prices on inflation "has begun to appear and may expand further in the short term," and Powell explicitly stated that "no officials currently support raising interest rates, but some officials advocate reducing the dovish tone of the policy statement"; on the other hand, Powell emphasized that he "will not become a shadow chairman" after leaving office, attempting to appease market concerns about the Fed's policy independence. However, just days after the policy meeting, internal divisions within the Fed became apparent: Trump's nominee, Governor Stephen Milan, voted against a rate cut, while "hawkish" figures such as Cleveland Fed President Hammark and Minneapolis Fed President Kashkari also voted against it (but in favor of maintaining the rate unchanged). The intensity of these internal divisions cast a shadow of great uncertainty over Warsh's first policy meeting after taking over.

The Federal Reserve's Beige Book, released on April 16, provides a valuable grassroots perspective for understanding the current state of the U.S. economy. The report shows that eight of the 12 Federal Reserve districts maintained small to moderate expansion, two districts saw little change in economic activity, and two districts experienced small to moderate declines. The most noteworthy inflation-related statement is: "Energy and fuel costs rose sharply in all 12 districts," with businesses generally reporting that input costs rose faster than sales prices, squeezing profit margins. Business decisions regarding hiring, pricing, and capital investment have become more complex, with "wait-and-see" becoming the most common business strategy. For crypto assets, the core signal from the Beige Book is that while the U.S. economy has not fallen into recession, growth momentum is being eroded by energy inflation, and the Fed's interest rate cut path will be more tortuous than previously expected by the market. This will continue to pose a suppressive macroeconomic backdrop for the liquidity-sensitive crypto market in the medium term.

III. The Deeper Waters of Institutionalization: ETFs Attracting Funds Against the Trend and Mining Companies Optimizing Their Balance Sheets

Amidst a significant pullback in Bitcoin prices from their peak, the contrarian buying activity of institutional funds has become the most noteworthy structural signal in the crypto market in May 2026. According to SoSoValue data, on May 1st (Eastern Time), US spot Bitcoin ETFs saw a net inflow of $630 million, with BlackRock's IBIT leading the way with $284 million, followed by Fidelity's FBTC with $213 million. On May 4th, spot ETFs recorded another $532 million in net inflow. This fund flow shows a significant divergence from BTC price movements: while prices fluctuated repeatedly between $76,000 and $81,000, ETFs continued to record net inflows, indicating that institutions were steadily building positions amidst price weakness, rather than exhibiting the retail investor behavior of chasing highs and lows. As of early May, the total net asset value of US spot BTC ETFs reached $103.785 billion, accounting for approximately 6.66% of the total market capitalization of BTC. The continued rise in institutional holdings is fundamentally changing Bitcoin's price discovery mechanism—gradually transitioning it from a highly volatile speculative asset dominated by retail investors to an asset allocated by institutions.

From a broader perspective, the deepening institutionalization process is reshaping Bitcoin's supply and demand balance. Since the approval of the US spot Bitcoin ETF in January 2024, the ETF channel has absorbed more than 580,000 BTC, an amount equivalent to approximately three years of Bitcoin network production. Meanwhile, the supply from long-term holders has been steadily increasing since mid-February 2026, indicating that long-term investors' willingness to hold positions has actually increased during price adjustments. This dual lock-up structure of "institutional + long-term holders" has led to a continuous contraction in the actual circulating supply of Bitcoin, providing implicit bottom support for prices amidst macroeconomic headwinds.

IV. Bitcoin Returns to $80,000: Halving Cycle Patterns and the Current Bullish/Bearish Dialectics

Standing at the beginning of May 2026, Bitcoin is staging a crucial drama of a strong rebound from a deep correction. BTC briefly fell to a low of around $60,000 in early February , then rebounded strongly in early May, regaining the $80,000 mark, a rebound of over 33% from the lowest point of this correction. This "return to $80,000" is still a 46% retracement from the all-time high reached in October 2025. However, compared to the devastating retail panic selling and large-scale mining shutdowns during the bear markets of 2018 and 2022, this correction in 2026 exhibits distinctly different structural characteristics: continuous net inflows into ETFs, increased holdings by long-term investors, and leading mining companies still optimizing their balance sheets rather than cutting production and exiting the market. These signals collectively point to one conclusion—the current situation is more likely a "deep correction within a bull market," rather than the beginning of a bear market signifying the end of the bull market.

Looking at the halving cycle pattern, Bitcoin completed its fourth halving in April 2024 ( the block reward decreased from 6.25 BTC to 3.125 BTC). Historical data shows that the 12 to 18 months following a halving is typically the most intense period of price discovery. After the 2012 halving, BTC broke its previous high approximately 12 months later; after the 2016 halving, it entered its main upward trend approximately 17 months later; and after the 2020 halving, it reached a cycle high approximately 12 months later. If we use this historical pattern as a reference, the 12 to 18 month window following the April 2025 halving corresponds to April to October 2026, which is precisely the current period. This means that the current price adjustment is very likely part of a post-halving "consolidation and accumulation" rather than a reversal of the cycle top. Of course, whether this historical pattern still holds true in the new environment of deepening institutionalization remains highly uncertain.

From a technical perspective, the core trading range for Bitcoin after its "return to $80,000" is $76,000 to $83,000. $80,000 is a significant psychological level and short-term support, while $83,000 is the location of the 200-day simple moving average, a crucial "bull-bear dividing line" that both bulls and bears must contend with. A successful breakout on the daily chart would target the $89,000 to $94,000 range. On the downside, $76,000 represents the low tested multiple times in April 2026; a breach of this level would target the $70,000 to $65,000 range. Momentum indicators show the RSI-7 has risen to 71.27, approaching overbought territory, indicating short-term technical downward pressure. However, the MACD formed a golden cross in mid-April, providing some momentum support for a medium-term upward move. Based on comprehensive technical signals, the most reasonable assessment at this juncture is that BTC is in a "confirmation phase after returning to $80,000," and the range-bound trading may continue for another 2 to 4 weeks until a clear signal of a macro catalyst appears.

V. Future Prospects: Three-Scenario Analysis and Key Observation Nodes

Based on three main themes—geopolitics, the Federal Reserve's policy path, and institutional fund flows—the crypto market may evolve along the following three scenarios from May to July 2026.

Scenario 1 (probability approximately 35%): Geopolitical easing + dovish signals from the Fed, BTC challenges $89,000 to $94,000. If the US and Iran reach a substantial framework agreement within the negotiation window following the suspension of the "Freedom of the Nation" program, the Strait of Hormuz resumes normal navigation, oil prices fall from their highs, and inflation expectations cool down; simultaneously, Warsh releases dovish signals in his first public speech after taking office on May 15. The simultaneous improvement of these two main factors will trigger a "double whammy" effect at the macro level: risk appetite will recover significantly, ETF inflows will accelerate, and BTC is expected to break through $83,000 (200-day moving average) within 2 to 4 weeks, and launch an attack on the $89,000 to $94,000 range. Key observation points for this scenario include: Warsh's inaugural speech around May 15, the US non-farm payroll data for April released on May 8, and the interim announcement of the US-Iran negotiations.

Scenario 2 (approximately 45% probability): Geopolitical stalemate continues + Fed remains on the sidelines, BTC will fluctuate between $70,000 and $85,000. This is the most fully priced-in neutral scenario currently. The US and Iran fail to reach a comprehensive agreement within the four-week ceasefire period, but no new large-scale military conflict erupts, and the Strait of Hormuz remains "semi-closed"; the Fed maintains a "data-dependent" stance after Warsh took office. In this scenario, BTC is most likely to maintain a wide-range fluctuation pattern, with ETF fund flows becoming the most direct driver of short-term prices—if weekly net inflows remain above $300 million, the price will tend towards the upper trendline; if there is a weekly net outflow, the price will test the lower trendline support. In this scenario, range trading is the most suitable strategy for most investors.

Scenario 3 (approximately 20% probability): Escalating geopolitical conflict + runaway inflation, causing BTC to retreat to the $65,000-$70,000 range. If the ceasefire agreement completely collapses, Iran announces a complete blockade of the Strait of Hormuz, oil prices break through $120 per barrel, and Goldman Sachs is forced to further revise its year-end PCE forecast; hawkish Fed officials publicly discuss the possibility of "raising interest rates to combat inflation if necessary." This macroeconomic "perfect storm" will simultaneously impact liquidity expectations and risk appetite, potentially causing BTC to fall below the psychological threshold of $70,000. Although the probability is relatively low, if it occurs, leveraged positions in the crypto market will face systemic liquidation pressure. In this scenario, cash and short-term Treasury bonds are the optimal holdings, and Bitcoin should only be considered after a macroeconomic turning point is confirmed.

VI. Conclusion: Identifying Structural Signals Amidst Macroscopic Fog

The crypto market in May 2026 is at a historic crossroads of three main themes: geopolitics, monetary policy, and institutionalization. The dramatic reversal of the "Freedom Project," the policy uncertainty brought about by the change of Federal Reserve Chairman, the verification period of the Bitcoin halving cycle, and the structural changes of continued contrarian accumulation through ETFs all contribute to an extremely complex and rich macroeconomic landscape. For investors, the key to understanding this phase lies in distinguishing between "noise" and "signals": the back-and-forth of geopolitical events and the hawkish/dovey debate among Federal Reserve officials are essentially short-term noise—they affect prices intraday to weekly, but cannot change the medium-term trend direction pointed to by the structural signals of deepening institutionalization and supply contraction during the halving cycle.

Macroeconomic headwinds are often the best friend of long-term investors. The macroeconomic pressures Bitcoin will face in May 2026—rising oil prices, uncertainty surrounding the Fed's hawkish stance, and ongoing geopolitical conflicts—are actually much milder compared to the darkest moments of the "liquidity crisis" in March 2020 and the "FTX crash + aggressive Fed rate hikes" in 2022. The continued rise in institutional holdings, the expansion of ETF product lines, and the fact that leading mining companies can still optimize their capital structure during downturns all silently tell a larger story: Bitcoin is gradually evolving from a marginal speculative asset into a permanent member of the global asset allocation landscape. This process is volatile, but the direction is clear. We suggest focusing on three key variables: First, Warsh's inaugural address around May 15th will determine the repricing direction of interest rate cut expectations; second, the substantial progress of the US-Iran ceasefire negotiations within the four-week window will determine the evolution of oil prices and inflation expectations; third, if the weekly inflow of funds into the US spot BTC ETF exceeds $500 million for two consecutive weeks, it will be the most direct signal of accelerated institutional buying. The macroeconomic fog will eventually dissipate, and those investors who remain steadfast and identify structural signals amidst the fog will be the most composed winners in the next round of market activity.