Why did BTC fall below $77,000: Dream of interest rate cuts shattered? + Multiple bearish signals emerge

Written by: Shannon@Jinse Finance

A seemingly hopeful rebound

By May 2026, Bitcoin once again gave the market a long-missed glimmer of hope.

After months of continuous decline, Bitcoin rebounded from late April to early May, climbing back above $80k, and on May 6th, it briefly touched $82,800, hitting a phased high since February. ETF funds have been flowing in net for six consecutive weeks, institutional support signals have strengthened, and short positions remain crowded... All these signs once fueled market expectations that this could be the start of a trend reversal for BTC.

Meanwhile, on May 14, 2026, the U.S. Senate Banking Committee passed the Clarity Act with 15 votes in favor and 9 against, officially submitting it to the full Senate for a vote. This was a major positive for the crypto industry.

However, this positive news seemed to have little impact on the market. Bitcoin retreated from its high and fell below $77,000 again.

This time, what crushed the bulls?

1. Inflation data exceeds expectations: rate cut dreams shattered, rate hike shadows emerge

The most direct trigger for this correction was the series of U.S. inflation data releases.

On May 12, U.S. data showed that April’s CPI year-over-year increase reached 3.8%, the highest since May 2023; subsequent PPI data soared to 6%, a new high since December 2022.

Both sets of data significantly exceeded market expectations, completely shattering previous hopes for rate cuts. After the April CPI data was released, the yields on 20-year and 30-year U.S. Treasury bonds broke above 5%, recently climbing over 5.1%.

CME’s FedWatch tool indicates that the probability of rate hikes in upcoming meetings within 2026 has risen to about 39%, while Polymarket prices in a 62% chance of no rate cuts throughout the year.

For Bitcoin, the reversal of rate cut expectations was a fatal blow. The bond market responded swiftly: the 30-year U.S. Treasury yield rose above 5%, the 10-year yield increased to 4.45%, the dollar index strengthened, and major U.S. stock indices opened lower. As a zero-yield risk asset, Bitcoin’s appeal was further compressed amid rising risk-free rates—its opportunity cost suddenly increased. Analysts pointed out that rising yields reduce risk premiums; when risk-free assets offer 4.5%, holding zero-yield assets becomes increasingly costly.

One of the culprits of inflation is ongoing Middle East geopolitical conflicts. The situation in Iran keeps the Strait of Hormuz under blockade, with gasoline prices surging 15.6% in April alone, which is a core driver of inflation. Short-term signs of inflation easing are not visible.

2. Federal Reserve leadership change: Waller to succeed, uncertainty fully realized

On May 13, the U.S. Senate confirmed Kevin Waller as the next Federal Reserve Chair with 54 votes in favor and 45 against, to serve a four-year term.

Current Fed Chair Powell’s term expires on May 15. According to regulations, Waller still needs to be formally appointed by the President and sworn in before officially taking office. Therefore, the Fed announced on the 15th that Jerome Powell would serve as interim Chair until Kevin Waller is sworn in.

Although Waller has not yet officially taken over, this historic leadership transition at the Fed has already sparked significant panic in the Bitcoin market.

Bitcoin is currently trading around $77,367. Market participants remain cautious about potential volatility following Waller’s succession, especially in an environment where only one rate cut is expected.

Waller’s hawkish background is the biggest concern. Markus Thielen, founder of 10x Research, said: “The market generally views Waller’s influence as bearish for Bitcoin because his emphasis on monetary discipline, preference for higher real interest rates, and tendency to shrink the balance sheet will categorize cryptocurrencies as a speculative bubble that will fade when monetary easing recedes, rather than as a hedge against currency devaluation.”

Historically, each Fed chair transition has triggered sharp declines: Yellen’s appointment saw an 83% drop, Powell’s first term a 84% decline, and Powell’s second term a 77% fall. When Waller took over on May 15, macro pressures were even more intense: CPI at 3.3%, oil prices over $115, and the Strait of Hormuz blockade entering its tenth week.

Notably, Waller has previously stated that Bitcoin “is the new gold for people under forty,” and his personal portfolio includes over a dozen blockchain protocols. But the market has chosen to avoid risk during this leadership change window rather than bet on his potential crypto-friendly stance. Waller’s first FOMC meeting will be on June 17, and every public statement he makes before then will be a market indicator.

3. ETF funds suddenly reverse: six weeks of inflows abruptly stop

The key support for the early May rebound was the continuous six-week net inflow of Bitcoin spot ETF funds. However, after the inflation data was released, this support shattered.

Bitcoin ETF flows have been outflowing since May 7, totaling $1.3 billion, ending the previous six-week streak of net inflows. The U.S. spot Bitcoin ETF saw a net outflow of up to $630 million on May 13, the largest single-day outflow since late January. The high inflation data forced the market to reassess risk exposure.

Three key factors combined to trigger this outflow: CPI data released on Tuesday showed a 3.8% increase; PPI surged to 6% on Wednesday, the highest since December 2022; Waller’s confirmation with a 54-45 vote reinforced hawkish expectations, pushing the probability of rate hikes to about 39%.

BlackRock’s IBIT fund alone faced redemption pressure of $28.5 billion, again becoming the largest single outflow that week. This signal is significant—when institutions like BlackRock start to withdraw, market confidence in short-term trends will further weaken.

4. Strategy buying sharply shrinks: the most steadfast buyers reduce BTC purchases

In Bitcoin’s recent price support logic, Strategy, founded by Michael Saylor, plays a very unique role—holding over 818,000 BTC, making it the largest corporate holder and a market-recognized “core buyer.”

However, Strategy announced a pause in Bitcoin purchases just before Q1 earnings, halting buys a week before April 4, 2026, which sparked concerns about institutional holdings. More worrying was that Strategy listed Bitcoin sales as a repurchase option—this, even as a technical financial management measure, sent a highly negative signal during a fragile market mood. When the most steadfast “permanent bulls” start discussing selling, the psychological impact far exceeds the actual effect.

Although Strategy resumed buying on May 11, with only 535 BTC purchased—compared to thousands or even 30,000+ BTC in April’s total of 56k BTC—the scale has shrunk significantly.

If Strategy stops buying, and ETF fund flows turn negative, this coin will lose its most stable buyer. With both major buying sources cooling off simultaneously, and technical pressures mounting, the price will naturally decline.

5. Geopolitical tensions: the Strait of Hormuz remains closed

Beyond macro and liquidity pressures, the shadow of the Strait of Hormuz continues to loom over the market in these two weeks.

U.S. President Trump again warned Iran on the 17th, saying “the clock is ticking,” and if Iran does not come up with a better deal, “they will face much harsher consequences than before.”

Oil prices continue to rise amid geopolitical tensions, further boosting inflation expectations, negatively impacting both crypto and stock markets; meanwhile, panic related to Hantavirus has added uncertainty, leading to short-term sentiment weakness and cautious trading.

Geopolitical risks, high oil prices, and rising inflation form a complex macro pressure cycle: geopolitical tension → rising oil prices → inflation acceleration → increased rate hike expectations → pressure on risk assets. Bitcoin happens to be at the end of this transmission chain.

This is a correction with clear causes

Review of the past two weeks’ price movements shows no single “black swan” that pushed Bitcoin from $82,800 to $77,000.

Instead, it’s the result of multiple negative factors converging in a tight window: inflation data exceeding expectations turned the question from “when to cut” into “whether to hike”; the leadership change at the Fed, with historical patterns and Waller’s hawkish label fueling panic; six weeks of ETF inflows suddenly reversing, erasing the market’s most important positive narrative; Strategy’s reduced buying, removing the most stable core demand; and ongoing geopolitical tensions, systematically depressing global risk appetite.

Currently, whether Bitcoin can break out of the $77,000–$82,000 range depends on whether bond yields can fall back or ETF fund flows stabilize and rebound.

The most critical upcoming event is Waller’s first FOMC meeting on June 17.

Until then, every inflation report and every fluctuation in U.S. Treasury yields will serve as a barometer of market sentiment.

The crypto market needs more patience, waiting for macro data and policy signals to give a clear answer.