Crypto Market Monthly Review and Outlook

Market Sentiment and Macroeconomic Environment

Despite the recent rebound, the overall atmosphere of the crypto market remains gloomy. The demand for asset diversification and value storage is still strong, but the price of Bitcoin is mainly influenced by short-term traders and is susceptible to macroeconomic and liquidity factors. Against the backdrop of the Federal Reserve maintaining a tight policy, cryptocurrencies are highly sensitive to liquidity conditions, which may lead to market volatility in the short term.

U.S. consumer confidence unexpectedly rose to 102 in May, ending three consecutive months of decline. While there is strong optimism about the current economy, concerns about a possible recession next year remain. Inflation expectations have slightly increased, reflecting ongoing worries about rising costs. Federal Reserve officials hinted that they might continue to raise interest rates, which has heightened cautious sentiment in the market.

Changes in Regulatory and Institutional Environment

The U.S. House of Representatives voted to repeal SAB 121, which restricts banks from providing encryption custody services for cryptocurrencies. Despite the White House threatening to veto, the bipartisan support for the repeal underscores the importance of integrating crypto assets into the traditional financial system. This political move demonstrates the recognition of the potential of cryptocurrencies and the demand for regulatory clarity.

The U.S. Securities and Exchange Commission has approved the first Ethereum spot ETF, marking an important milestone in the legalization process of cryptocurrency in the United States. This underscores Ethereum's status as a mature investment asset and is expected to enhance market liquidity and drive innovation.

Turkey is advancing a bill to regulate encryption service providers, aiming to standardize and expand its active crypto market. Considering the high cryptocurrency adoption rate among Turkish citizens, this legislation could promote the development of local digital asset services and products.

Increased Institutional Participation

The recently issued ETFs in Hong Kong did not meet expectations, with a trading volume of only $11.2 million, while the United States reached $655 million. There has been a significant outflow of funds from Bitcoin spot ETFs listed in the United States, but this is seen as part of normal market fluctuations.

Driven by a surge in cryptocurrency trading volume, some fintech companies reported strong performance in the first quarter. The number of retail traders has increased significantly, and institutional trading volume has also grown. This trend highlights the dynamic changes in the crypto market, with both retail and institutional investors showing strong interest.

Bitcoin and Ethereum exchange-traded notes listed on the London Stock Exchange mark a step towards greater legitimacy for the crypto market. While initial enthusiasm is limited, these products provide professional investors with a convenient way to gain exposure to encryption, continuing the trend of simplifying entry into crypto investments.

Geopolitics and International Trade

Two large Russian metal companies have begun using stablecoins to trade with Chinese partners, bypassing traditional banking systems. This highlights the efficiency of stablecoins in cross-border payments and may prompt U.S. regulators to consider establishing clearer regulations.

After the remarks made by Taiwanese officials, China has increased its military activities near Taiwan. These include exercises simulating missile attacks, which have raised the risk of conflict.

Saudi Arabia plans to discuss with Japan the transition of oil trade settlements from the US dollar to the yen. This could boost the yen, reduce Japan's need to sell US Treasury bonds, and slightly weaken the global dominance of the dollar.

China and Serbia have agreed to increase trade based on the renminbi, further reducing reliance on the US dollar. This reflects a broad trend of countries diversifying their trade currencies and financial reserves, marking a shift in global economic relations.

Outlook

As the regulatory environment becomes clearer and institutional participation increases, the crypto market is gradually integrating into the mainstream financial system. However, geopolitical tensions and economic uncertainties remain risk factors that need to be closely monitored. In the future, the balance between innovation and financial stability will continue to be a core theme in the industry's development. Investors need to stay vigilant and closely monitor market dynamics to respond to the challenges and opportunities presented by this rapidly evolving field.