Abstract

In early May 2026, the global encryption market showed extreme differentiation and high uncertainty under the joint disturbance of three macro variables. On the geopolitical level, Trump announced the launch of "Project Freedom" to escort merchant ships in the Strait of Hormuz in a high-profile manner on May 4. Just one day later, he dramatically announced the suspension, saying "significant progress has been made in the US-Iran Comprehensive Agreement." However, Iran insisted that it was still in a state of war with the United States and continued to close the strait, requiring all transit ships to obtain permission from Iran. As for the Federal Reserve, Warsh will officially succeed Powell as chairman around May 15, and the interest rate meeting on April 30 will remain unchanged as scheduled. The Beige Book shows that the sharp rise in energy prices has put overall pressure on corporate costs in 12 jurisdictions. Goldman Sachs then raised its year-end core PCE forecast to 2.6%. Under these macro headwinds, Bitcoin rebounded strongly from the low of $60,000 in early February and regained the $80,000 mark, but the persistence of macro pressure makes it unclear whether the rebound can be consolidated. At the same time, institutional behavior showed a rare "counter-trend accumulation" feature: on May 1, the US spot BTC ETF had a single-day net inflow of US$630 million, BlackRock IBIT collected US$284 million, and Fidelity FBTC recorded an inflow of US$213 million. Taken together, the game between macro pressure and institutional bullishness is entering a critical stage, and the choice of market direction will depend on the resonance rhythm of the three major variables: geography, the Federal Reserve, and institutional funds.

1. Geographical Game: Reversal of the "Freedom Plan" in the Strait of Hormuz and Renewal of Inflation

On May 4, 2026, U.S. President Trump announced in a high-profile post on Truth Social that the United States would officially launch the "Freedom Plan" merchant ship escort operation in the Strait of Hormuz that morning in the Middle East time, deploying guided missile destroyers, more than 100 land-based and sea-based aircraft, multi-domain unmanned platforms and 15,000 active military personnel. The United States characterized it as a "defensive humanitarian operation" and intended to bypass the 60-day authorization period for presidential military operations under the US War Powers Act. However, just one day later, Trump issued another announcement announcing that in view of "significant progress in the US-Iran Comprehensive Agreement", he decided to suspend the implementation of the "Freedom Plan", but emphasized that the naval blockade against Iran "will continue to be fully and effectively implemented." The dramatic reversal caught global markets off guard, with crude oil prices fluctuating sharply after the news was announced.

Iran’s attitude is far tougher than that of the United States. Velayati, the foreign affairs adviser to Iran's supreme leader, made it clear that the Strait of Hormuz has been closed and will not be reopened unless "the national will of the Islamic Republic of Iran decides"; all ships planning to pass through the strait must submit an application through the official email and obtain Iran's permission to pass. The chairman of the National Security Committee of the Iranian Parliament warned that any foreign armed forces (especially the US military) will be attacked if they approach or enter the Strait of Hormuz. The United States and Iran have extremely sharp differences in their stances on key issues such as the nature of the ceasefire, access rights to the strait, and whether the "Freedom Plan" is truly suspended. The market's pricing of geopolitical risks is far from being relaxed.

The direct consequences of this geopolitical game have initially appeared in global inflation data. Affected by the continued escalation of the military conflict between the United States and Iran and the United Arab Emirates' announcement to withdraw from the OPEC+ alliance on May 1, international oil prices continued to rise from late April to early May, pushing energy prices up significantly. Goldman Sachs Group subsequently raised its year-end core PCE inflation forecast to 2.6% from the previous 2.5%, and the overall PCE forecast was raised to 3.4% from 3.1%. What is even more alarming is that the driving force behind this inflation does not come from overheating on the demand side, but from supply-side shocks (oil prices) plus the effect of tariffs. This makes the Federal Reserve's monetary policy response mechanism more complicated - it neither dares to raise interest rates easily (for fear of exacerbating downward pressure on the economy), but also finds it difficult to initiate interest rate cuts (the risk of inflation expectations de-anchoring increases). For Bitcoin, this "stagflationary" macro environment has historically suppressed it in both directions: its safe-haven properties have not yet gained widespread consensus, and expectations of liquidity contraction continue to suppress the valuation of risky assets.

2. On the eve of the change of leadership of the Federal Reserve: the crossroads of Beige Book warning and policy independence

In mid-May 2026, the Federal Reserve will usher in the most controversial chairmanship change in modern history: Kevin Warsh will officially succeed Jerome Powell as Chairman of the Federal Reserve. Breaking from the tradition of the past 75 years, Powell will continue to serve as a governor of the Federal Reserve after stepping down as chairman. This arrangement is widely interpreted by the market as a political compromise between the White House and the Federal Reserve for "incomplete decoupling". Warsh's policy stance shows a subtle "hybrid mix of hawks and doves": he is hawkish in terms of inflation governance and balance sheet management, emphasizing monetary policy discipline and framework restructuring, and has publicly criticized the Federal Reserve's ultra-loose policies over the past 20 years as "seriously deviating from its mission." However, he is dovish in terms of long-term interest rate paths, recognizing the natural inhibitory effect of technological progress on inflation, and supporting the advancement of interest rate cuts when data permits. This mixed stance has left the market divided on the monetary policy path of the "Wash Era" and has also become a key source of uncertainty for the macro pricing of the crypto market in May.

The Federal Reserve interest rate meeting that ended 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 sent out by the statement after the meeting and Powell's press conference were complicated: on the one hand, the impact of rising energy prices on inflation "has begun to appear and may expand further in the short term." Powell made it clear that "no officials currently support raising interest rates, but some officials advocate reducing the accommodative tone of the interest rate meeting statement." On the other hand, Powell emphasized that he "will not become a shadow chairman" after leaving office, trying to appease market concerns about the damage to the Fed's policy independence. However, just a few days after the interest rate meeting ended, internal divisions within the Fed emerged: Stephen Millan, the governor nominated by Trump, voted against the interest rate cut, while "hawks" such as Cleveland Fed President Hammack and Minneapolis Fed President Kashkari also voted against (but the direction was to maintain the same). The fierce internal divisions within the Fed cast a shadow of high uncertainty on the first interest rate meeting after Warsh took over.

The Federal Reserve’s Beige Book released on April 16 provides a valuable grassroots perspective for understanding the current real situation of the U.S. economy. The report showed that 8 of the 12 federal reserve districts maintained small to moderate expansion, 2 jurisdictions had basically no change in economic activity, and 2 jurisdictions experienced a small to moderate decline. The most watched inflation-related statement is: "Energy and fuel costs have increased significantly in all 12 jurisdictions." Companies generally report that input cost increases exceed sales price increases, and profit margins are compressed. Corporate decisions on hiring, pricing, and capital investment have become more complex, and "wait and see" has become the most common business strategy. For crypto assets, the core signal conveyed by the Beige Book is that although the U.S. economy has not fallen into recession, its growth momentum is being eroded by energy inflation, and the Federal Reserve’s interest rate cut path will be more tortuous than previous market expectations. This will still constitute a repressive macro backdrop in the medium term for the crypto market, which is known for its sensitivity to liquidity.

3. Institutionalized Deep Water Zone: ETFs go against the trend to attract gold and mining companies’ balance sheets are optimized

In the context of the sharp retracement of Bitcoin prices from highs, the contrarian buying behavior of institutional funds has become the most noteworthy structural signal in the crypto market in May 2026. According to SoSoValue data, on May 1, Eastern Time, U.S. spot Bitcoin ETFs had a single-day net inflow of US$630 million, with BlackRock IBIT ranking first with US$284 million and Fidelity FBTC ranking second with US$213 million. On May 4, spot ETFs once again recorded a net inflow of US$532 million. There is a significant divergence between this capital flow and the price trend of BTC: the price fluctuated repeatedly in the range of 76,000 to 81,000 US dollars, but the ETF continued to record net inflows, indicating that institutions are still building positions steadily amid weak prices, rather than the behavior pattern of retail investors chasing the rise and killing the fall. As of early May, the total net asset value of U.S. spot BTC ETFs has reached US$103.785 billion, accounting for approximately 6.66% of the total market value of BTC. The continued increase in the proportion of institutional holdings is fundamentally changing the price discovery mechanism of Bitcoin - from a highly volatile speculative asset dominated by retail investors to a gradual transition to an institutional allocation asset.

From a more macro perspective, the deepening of the institutionalization process is reshaping Bitcoin's supply and demand balance sheet. Since the U.S. spot Bitcoin ETF was approved in January 2024, the ETF channel has absorbed more than 580,000 BTC, an amount equivalent to about three years of output of the Bitcoin network. At the same time, the supply of long-term holders has continued to rise since mid-February 2026, indicating that during the price adjustment process, the willingness of long-term investors to hold positions has increased instead of falling. This double lock-up pattern of "institutions + long-term holders" has caused the actual circulating supply of Bitcoin to continue to shrink, providing implicit bottom support for prices amid macro headwinds.

4. Bitcoin returns to $80,000: the law of the halving cycle and the long-short dialectic of the current node

Standing at the time node of early May 2026, Bitcoin is performing a key drama of strong return from a deep correction. BTC fell to a low near $60,000 in early February, then rebounded strongly in early May and regained the $80,000 mark, rebounding more than 33% from the lowest point of this round of adjustment. This "return to $80,000" trend is still about a 46% retracement from the all-time high set in October 2025. However, compared with the tragic situation of panic selling by retail investors and large-scale shutdowns of mining companies in the two rounds of bear markets in 2018 and 2022, this round of adjustment in 2026 shows completely different structural characteristics: ETFs continue to have net inflows, long-term holders' positions have increased, and leading mining companies are still optimizing their balance sheets rather than cutting production and leaving. These signals collectively point to a judgment - the current situation is more likely to be a "deep adjustment in the bull market" rather than the beginning of a bear market in which "the bull market is over".

Judging from the rules of the halving cycle, Bitcoin will complete its fourth halving in April 2024 (block reward dropped from 6.25 BTC to 3.125 BTC), and historical data shows that the 12 to 18 months after the halving are usually the most intense stage of price discovery. About 12 months after the 2012 halving, BTC broke through the previous high; about 17 months after the 2016 halving, it entered the main wave; about 12 months after the 2020 halving, it hit a cycle high. If we take this historical law as a reference, the 12 to 18 month window after the halving in April 2025 corresponds to April 2026 to October 2026, which is exactly the period we are in now. This means that the current price adjustment is most likely part of the post-halving "shuffle and preparation" rather than a reversal at the top of the cycle. Of course, there is a high degree of uncertainty as to whether this historical law is still valid in the new environment of deepening institutionalization.

From a technical perspective, Bitcoin's core gaming range after "returning to $80,000" is $76,000 to $83,000. US$80,000 itself is an important psychological barrier and short-term support level, while US$83,000 is the location of the 200-day simple moving average, and is also the "bull-bear dividing line" that both bulls and shorts must compete for; if an effective breakthrough at the daily level can be achieved, the upper target will point to the range of US$89,000 to US$94,000. The $76,000 below is the low tested many times in April 2026. If it falls, the technical downside target will point to the range of $70,000 to $65,000. Looking at the momentum indicator, RSI-7 has risen to 71.27, close to the overbought zone, and there is technical callback pressure in the short term; however, MACD has formed a golden cross in mid-April, providing certain momentum support for the mid-term upside. Based on the comprehensive technical signals, the most reasonable judgment at the current node is that BTC is in the "confirmation stage after returning to $80,000", and the range oscillation may continue for 2 to 4 weeks until there is a clear signal from the macro catalyst.

5. Prospects: three scenario deductions and key observation nodes

Based on the three main lines of geopolitics, the Federal Reserve’s policy path and institutional capital flows, the crypto market from May to July 2026 may evolve along the following three scenarios.

Scenario 1 (probability about 35%): Geopolitical easing + the Federal Reserve releases dovish signals, BTC challenges $89,000 to $94,000. If the United States and Iran reach a substantive framework agreement within the negotiation window after the suspension of the "Freedom Plan", normal traffic in the Strait of Hormuz will resume, oil prices will fall from highs, and inflation expectations will cool down; at the same time, Warsh will release a dovish signal in his first public speech after taking office on May 15. The simultaneous warming of the two main lines will trigger a "double-click" effect at the macro level: risk appetite is significantly restored, ETF capital inflows are accelerating, and BTC is expected to exceed US$83,000 (200-day line) within 2 to 4 weeks and launch an impact in the range of US$89,000 to US$94,000. Key observation nodes for this scenario include: Warsh’s inauguration speech around May 15, the April U.S. non-farm employment data released on May 8, and the phased announcements of U.S.-Iran negotiations.

Scenario 2 (probability about 45%): The geopolitical stalemate continues + the Federal Reserve remains on the sidelines, and BTC maintains a range of $70,000 to $85,000. This is the most fully priced neutral scenario currently in the market. The United States and Iran were unable to reach a comprehensive agreement during the four-week ceasefire period, but no new large-scale military conflict broke out. The Strait of Hormuz maintained a "semi-blockade" state; the Federal Reserve maintained a "data-dependent" stance after Warsh took office. Under this scenario, BTC is most likely to maintain a wide range of fluctuations, and ETF capital flows will become the most direct driver of short-term prices - if the weekly net inflow remains above US$300 million, the price will be biased towards the upper track; if the single-week net outflow reappears, the price will test the lower track support. In this scenario, range operation is the most suitable strategy for most investors.

Scenario 3 (probability about 20%): Escalating geopolitical conflicts + out-of-control inflation, BTC retreats to the range of US$65,000 to US$70,000. If the ceasefire agreement breaks down completely and Iran declares a complete blockade of the Strait of Hormuz and oil prices exceed US$120 per barrel, Goldman Sachs' year-end PCE forecast will be forced to further increase; hawkish officials from the Federal Reserve openly discuss the possibility of "raising interest rates to deal with inflation if necessary." This macro "perfect storm" will impact liquidity expectations and risk appetite at the same time, and BTC may fall below the psychological mark 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 government bonds are the best positions, and Bitcoin should make arrangements after confirming the macro turning point.

6. Conclusion: Identifying structural signals in the macro fog

The crypto market in May 2026 is at the historic intersection of the three main lines of geopolitics, monetary policy and institutionalization. The dramatic reversal of the "Freedom Plan", the policy uncertainty brought about by the replacement of the chairman of the Federal Reserve, the verification period of the cycle law after the Bitcoin halving, and the structural changes in the ETF channel's continued counter-trend accumulation, together constitute an extremely complex and extremely rich macro chess game. For investors, the key to understanding this stage is to distinguish between "noise" and "signal": the back-and-forth of geopolitical events and the hawk-dove debate among Fed officials are essentially short-term noise - they affect prices from day to week, but cannot change the medium-term trend direction pointed to by the structural signals of deepening institutionalization and supply contraction during the halving cycle.

Macro headwinds are often the best friend of long-term allocators. Compared with the "liquidity crisis" in March 2020 and the darkest moments of "FTX collapse + aggressive interest rate hike by the Federal Reserve" in 2022, the macro pressures that Bitcoin experienced in May 2026 - rising oil prices, the Fed's undecided hawkishness, and continuing geopolitical conflicts - were actually much milder. The continued rise in institutional holdings, the continuous expansion of ETF product lines, and the fact that leading mining companies can still optimize their capital structure during the trough period are all silently telling a larger narrative: Bitcoin is gradually evolving from a marginal speculative product to a permanent member of the global asset allocation map. This process is full of fluctuations, but the direction is clear. We recommend focusing on three key variables: First, Warsh’s inauguration speech around May 15 will determine the direction of repricing expectations for interest rate cuts; second, the substantial progress of US-Iran ceasefire negotiations within the 4-week window will determine the evolution path of oil prices and inflation expectations; third, if the weekly capital flow of the US spot BTC ETF exceeds $500 million in net inflows for two consecutive weeks, it will be the most direct signal for institutions to accelerate the establishment of positions. The macro fog will eventually dissipate, and those investors who maintain their composure in the fog and identify structural signals will be the calmest winners in the next round of market conditions.