Bitcoin, the foremost cryptocurrency by market cap, has experienced an impressive surge this May. Starting the month at approximately $94,146, Bitcoin’s value has escalated by 18.66% in just three weeks, reaching $111,970 on May 22. Despite a brief correction the following day, where prices dropped by 3.9%, the cryptocurrency witnessed renewed buying interest, lifting prices back to around $108,789, just shy of its record high by 2.8%. The sentiment is one of cautious optimism as claims that the rally has peaked are countered by some voices in the market.
What Drove Bitcoin’s May Surge?
Several factors have bolstered Bitcoin’s climb this month. Continuous institutional investment, buoyed by Spot ETF flows, limited post-halving supply, and potential U.S. interest rate reductions, have all contributed to Bitcoin maintaining a value above $100,000. Furthermore, the futures market indicates robust investor participation, with leveraged positions exceeding $15 billion since May 18. Bitcoin’s market dominance continues to delay the anticipated “altcoin season,” maintaining its hold over 60% market share.
Is the Market Rally Over?
According to technical signals, while short-term activity showed some cooling, there has not yet been a confirmed broader price adjustment. Indicators like the daily Relative Strength Index (RSI) have retreated from overbought areas, and current 30-day volatility rates are at a low not seen since mid-March. On-chain data further supports the notion of supply tightening, as long-term investors choose to hold rather than liquidate their holdings.
Lark Davis highlighted, “Traditional top signals are not yet present,” suggesting the market rally may still not be over.
In his recent analysis, Davis explored the Net Realised Profit-Loss (NPL) metric. It provides insights into the market’s selling pressure by assessing profit from sold Bitcoin. Although not reaching the peaks observed during the 2021 bull cycle, the lower current values imply limited risk of an extensive market correction soon. Similarly, the Net Unrealised Profit-Loss (NUPL) indicator echoes this, as despite climbing, it remains beneath the exuberant “Euphoria” threshold.
Critical points from this analysis include:
While these indicators signal potential for further growth, macroeconomic factors remain a concern. Any significant shift in U.S. Federal Reserve policy, regulatory actions, or stock market downturns could swiftly impact Bitcoin’s current trajectory. Close attention to insights such as NPL, NUPL, and trading volumes will be crucial for market participants in assessing their strategies moving forward.
