There is only one step from the sublime to the ridiculous. After a 72% surge from January to April, Bitcoin became an underperformer in May. It is losing to stocks, bonds, and commodity market assets. At the same time, the decreasing correlation with U.S. stock indices indicates difficulties within the crypto system. And indeed, such problems exist. Decreased liquidity, blockchain overload, and regulatory attacks undermine investor sentiment and cause BTC/USD quotes to fall.

Bitcoin, gold, and market index trends in May

According to CCData, the volume of spot trading on Binance, the largest digital asset exchange, fell by 48% in April to $287 billion. This is the second lowest monthly figure since 2021. The market is operating under very low liquidity conditions, which is likely due to market makers leaving the market. The reasons can be traced to tighter controls, mass checks, and increased regulatory activity.

The suspension of Bitcoin withdrawals on Binance speaks to the fragility of the crypto system. The exchange was forced to do this due to a surge in meme coin minting, which has clogged the entire network. Blockchain data show about 300,000 pending transactions in the Bitcoin network. CryptoQuant notes that the average transaction fee has risen to $14. At the beginning of the year, it was $0.6.

Trust is hard to earn but easy to lose. The loss of trust in the crypto industry is reflected in the fall in liquidity, blockchain problems, and fears of tighter regulation of the crypto industry. All this leads to a decrease in BTC/USD quotes. Their growth potential no longer seems astronomical. According to Deribit research, the highest price of Bitcoin option contracts expiring in May–July is 32,000. Just a week ago, it was 40,000.

Range of Bitcoin option prices

There are rumors in the market that the leader of the cryptocurrency sector's decreased correlation with U.S. stock indices is due to the waning influence of macroeconomics on BTC/USD. In my opinion, this is not the case. One of the drivers of the current Bitcoin crash is the resurgent dollar. Following U.S. job market statistics, investors doubt that the Federal Reserve will lower the federal funds rate in 2023. Prior to this, expectations of a "dovish" pivot were pushing down USD index quotes.

In my opinion, the BTC/USD rally in January–April was excessive. Most likely, Bitcoin's wild swings are a thing of the past. It is becoming a regular financial instrument. And that means it should find its price niche. I assume that the trading range in the medium term will be formed around 25,000–10,000.

Technically, the bulls' inability to break beyond the upper boundary of the triangle has resulted in their defeat. Quotes broke the lower boundary and headed downward. As long as they stay below the 27,125 pivot level, the mood remains bearish. Selling towards 25,000 and 23,200 is currently relevant.