May and early June 2026 highlighted the tension between supportive crypto-specific developments and a more challenging macroeconomic backdrop. The period began with Bitcoin (BTC) climbing above $80,000 for the first time since January, supported by strong institutional demand and positive regulatory developments.
In the weeks that followed, however, sentiment weakened as macroeconomic concerns re-emerged. Bitcoin fell back toward $60,000 and ETF flows turned negative, reversing part of the gains seen earlier in the rally.
The CLARITY Act (the proposed U.S. law designed to establish a clearer regulatory framework for cryptocurrencies and define oversight responsibilities among regulators) cleared the Senate Banking Committee on May 14, and Bitcoin briefly rose to $81,965 following the news. However, some analysts had already expressed caution about the strength of the rally. In reports published in April 2026, CryptoQuant noted that the move into the upper-$70,000 range appeared to be driven largely by speculative activity, with limited evidence of sustained spot-market demand.
The second half of May saw those concerns come into sharper focus. Bitcoin ended the month around $73,500, down roughly 3.7%. While the monthly decline was relatively modest, it followed a more significant pullback from the highs reached earlier in the month. Ethereum closed May near $2,100, remaining below its April peak of $2,460 and underperforming Bitcoin over the period. Bitcoin dominance held at approximately 58%, keeping the market firmly in what CoinMarketCap classifies as “Bitcoin Season”.
In early June, sentiment weakened further. On June 1, Strategy (formerly MicroStrategy) disclosed that it had sold 32 BTC between May 26 and May 31 for approximately $2.5 million, marking its first net Bitcoin sale since December 2022. The transaction represented only around 0.0038% of the company’s 843,706 BTC holdings and was undertaken to help fund dividends on its STRC preferred stock. While the financial impact was negligible, the announcement attracted attention given Strategy’s long-standing reputation as one of Bitcoin’s most committed corporate holders.
On June 3, Iran launched missile and drone strikes on Kuwait International Airport, the U.S. Navy’s 5th Fleet headquarters in Bahrain, and bases in Jordan in the clearest escalation since the April ceasefire. Over $700 million in leveraged long positions were liquidated within 12 hours. Bitcoin plunged below $65,000 and continued falling, touching $61,351 by early June, perilously close to the February low of $60,000. The Crypto Fear and Greed Index dropped to 23, deep in Extreme Fear. Total crypto market capitalisation fell from $2.53 trillion in mid-May to $2.25 trillion. By the time the dust settled, Bitcoin was trading around $63,000, roughly 50% below its October 2025 all-time high of $126,000.
The Macro
Three forces converged a new Federal Reserve (Fed) chair, a dying ceasefire, and the evaporation of rate-cut expectations. Kevin Warsh was confirmed 54-45 on May 13, the closest vote for a Fed chair in modern history, and sworn in on May 22. He is the most crypto-literate central banker ever to hold the position, with disclosed investments in several Crypto related entities (all divested before taking office). He has called Bitcoin “the new gold for people under 40.” But crypto-friendly or not, the rate-math dominated. Warsh inherited a sticky 3% to 4%inflation, oil above $94, and elevated bond yields. By early June, the probability of zero rate cuts in 2026 hit 68.8%, with some traders positioning for hikes. Bitcoin tracked this repricing almost exactly from $82,000 in mid-May to the low $60,000s, mirroring the collapse in rate-cut expectations.
The Iran conflict was the accelerant. The April ceasefire unravelled in late May when U.S. strikes near Bandar Abbas triggered retaliatory action. On June 3, Iran launched missiles and drones at Kuwait International Airport, the 5th Fleet HQ in Bahrain, and installations in Jordan. The familiar transmission chain reasserted itself oil spike, inflation repricing, risk-off across all asset classes. Bitcoin’s roughly 15% decline from early May highs to early June lows was significantly steeper than equities’ move, confirming that in acute geopolitical shocks, crypto still trades as a high-beta risk asset rather than a hedge.
Micro regulation, on-chain, and institutions
The CLARITY Act cleared the Senate Banking Committee on May 14 in a 15-9 bipartisan vote. The 309-page bill assigns the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over digital commodities and establishes a 11 reserve mandate for stablecoin issuers. It now needs 60 Senate floor votes, with the unresolved ethics provision (around government officials’ crypto holdings) remaining the central obstacle. The White House is targeting a July 4 signing; enforceable rules would not arrive before 2027 regardless.
On-chain signals were mixed. Daily Active Wallets dropped to roughly 531,000, and new wallet creations fell to around 203,000, marking the lowest activity levels seen in two years, suggesting retail was taking profit and exiting. Exchange reserves hit multi-year lows earlier in May, but the late-month ETF outflow dynamic overwhelmed the supply picture. On June 1st, the Chicago Mercantile Exchange, one of the world’s leading derivatives exchanges, launched Bitcoin volatility futures, adding the first regulated instrument for trading BTC price swings.
The flows
The flow picture reversed towards the end of the Month. Through mid May, the six-week inflow streak from April extended, with total spot Bitcoin ETF net assets crossing $100 billion. Then, starting around May 20, ETFs recorded ten consecutive days of net outflows totalling approximately $3 billion, over 40,000 BTC leaving the products. The late May weekly outflow of $1.47 billion was the largest of 2026. By early June, year-to-date flows had turned negative at -$3.1 billion, with institutional and retail capital rotating toward AI and the new waves of IPOs. The same ETF infrastructure that had provided a structural floor in April became the primary channel for institutional de-risking.
Conclusion
We continue to monitor the situation. The political and macro backdrop is shifting rapidly, with the CLARITY Act, the Fed transition, and the Iran conflict all creating noise. Meanwhile, the speculative imagination has moved elsewhere SpaceX’s IPO has become the latest magnet for investors chasing the next unicorn, competing with crypto for the same pool of risk-seeking capital. How that dynamic resolves will shape the second half of the year as much as any regulatory vote or rate decision.
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