May 2024 Crypto Market Forecast (2024)

Bitcoin has pulled back from all-time highs and other top cryptocurrencies have struggled as investors are not getting the bitcoin halving bump they want.

Investors flocked to bitcoin and other cryptos in recent months following the launch of the first spot bitcoin exchange-traded funds in January. However, optimism surrounding the imminent launch of the first Ethereum spot ETFs has faded in recent weeks.

In addition, crypto investors are increasingly concerned about a potential downturn in the U.S. economy as inflation remains stubbornly sticky while GDP growth dropped sharply in the first quarter.

April Crypto Market Performance

Inflows to new spot bitcoin ETFs pushed bitcoin prices to new all-time highs above $73,000 in March. However, bitcoin prices pulled back from their highs in April. They finished the month slightly higher than $60,000.

Similarly, after rising as high as $4,092 in March, Ethereum prices finished April right below $3,000 as investors continue to hope spot bitcoin ETF approval will soon open the door for approval of spot Ethereum ETFs by the U.S. Securities and Exchange Commission.

Although bitcoin prices declined more than 8% in April, they are still up around 50% year-to-date. Ethereum prices also dropped more than 8% in the month but are up about 40% so far in 2024.

The largest spot bitcoin ETF by assets under management, the Grayscale Bitcoin Trust ETF (GBTC), declined 11% in April. However, that was caused by investor concerns about the annual cost of that particular fund, not by any jitters over strategic cryptocurrency issues or macroeconomic trends.

Among the 10 largest cryptocurrencies by market capitalization, Toncoin (TON) was the best April performer with a 5% gain. Avalanche (AVAX) was the worst performer with a 37% decline.

Bitcoin Halving Complete

The bitcoin network completed its latest halving event on April 19. Each time an additional 210,000 blocks of transactions are added to the bitcoin blockchain, the network automatically undergoes a halving, during which the reward bitcoin miners receive for validating a block of transactions is cut in half.

Bitcoin halvings reduce the supply of new BTC created. Historically, bitcoin prices have bottomed roughly a year before a halving occurs and continue to rally for roughly a year after a halving is completed.

The latest halving at block 840,000 in the bitcoin blockchain was the fourth halving the bitcoin network has completed since the crypto launched back in 2009. The halving cut the number of rewards bitcoin miners receive for verifying a single block of transactions from 6.25 BTC to 3.125 BTC.

Bitcoin Runes Launch

The latest bitcoin halving also coincided with the launch of Bitcoin Runes, a new protocol that will allow crypto enthusiasts to create and trade meme coins on the bitcoin blockchain. Meme coins are a subset of cryptocurrencies typically created as satire and intended as a tribute to internet culture.

Bitcoin Runes was developed by Casey Rodarmor, who previously created and launched Bitcoin Ordinals in 2023. Bitcoin Ordinals effectively brought non-fungible tokens, or NFTs, to the bitcoin network for the first time. The popularity of NFT trading on the Ethereum network and other blockchains has exploded in recent years.

Unlike NFTs, which are all unique, Bitcoin Runes allow for the creation of fungible tokens that are identical and interchangeable, much like different $1 bills.

The Bitcoin Runes market has very low liquidity and has demonstrated extreme price volatility following its launch. As of late April, more than two-thirds of Runes were in the red, and critics have blasted the protocol for its role in ramping up bitcoin transaction fees.

Spot Ethereum ETFs?

VanEck, ARK Investment Management and seven other firms have filed applications with the SEC to launch spot Ethereum ETFs in the U.S.

The first spot Ethereum ETF decision deadline occurs May 23 for the VanEck application. It is due to be followed by the ARK application decision deadline on May 24. Unfortunately, applicants have reported recent meetings with the SEC have been discouraging. Sources close to the matter suggest the SEC is likely to reject the first wave of spot Ethereum ETF applications.

The SEC approved the first batch of Ethereum futures ETFs in October 2023, leaving investors hopeful that a spot Ethereum ETF could be coming soon. Ethereum futures ETFs hold futures contracts, whereas a spot Ethereum ETF would hold ETH cryptocurrency directly.

The SEC may want to observe the performance of the Ethereum futures ETFs and the spot bitcoin ETFs for an extended period before greenlighting spot Ethereum ETFs.

More Regulatory Headaches Ahead

Meanwhile, regulators continued their crypto market crackdown in April:

• On April 24, the U.S. Department of Justice filed charges against the co-founders of Samourai Wallet tied to their alleged role in facilitating more than $100 million in money laundering.
• After the SEC sent Consensys Software a Wells notice in early April warning the company of an imminent enforcement action, Consensys filed a lawsuit against the SEC in response, challenging the regulator’s authority over Ethereum.
• On April 10, crypto exchange Uniswap Labs also disclosed it has received a Wells notice from the SEC, notifying the exchange that the regulator plans to recommend legal action against it.

James Davies, co-founder and chief product officer at Crypto Valley Exchange, says the SEC’s actions against Samourai, Consensys and Uniswap have been far more impactful in recent weeks than the bitcoin halving.

“The bitcoin halving was largely priced in, and people expected the launch of Runes (the latter of which was clearly a buy the news, sell the event situation), but these moves by the U.S. regulator weren’t nearly as telegraphed and will have far more wide-ranging impacts to the industry,” Davies says.

However, Davies also says Ripple and other crypto projects and platforms that regulators are targeting will continue to fight back in court.

“Importantly, Ripple’s seeming success in fighting the SEC in court has emboldened other projects to do the same, and we would expect countersuits to set the stage for the court battles that will define the industry going forward,” Davies says.

Other Crypto Headlines

On April 5, a New York jury sided with the SEC in its lawsuit against Terraform Labs and the company’s former CEO Do Kwon.

The jury ruled the South Korean entrepreneur and his company defrauded investors by misleading them about the stability of stablecoin TerraUSD ahead of its 2022 collapse, which wiped out $40 billion in value.

The Grayscale Bitcoin Trust ETF continues to experience heavy outflows as investors dump GBTC shares in favor of spot bitcoin ETFs with a more investor-friendly fee structure.

As of mid-April, investors had pulled more than $16 billion from the GBTC fund since it was converted to an ETF on January 11. During that same period, the 10 competing spot bitcoin funds have experienced more than $29 billion in net inflows.

Crypto Catalysts Ahead

Anthony Rousseau, head of brokerage solutions at TradeStation Group, says crypto investors can expect more volatility in May tied to the ongoing regulatory crackdown on crypto.

“I believe the DOJ, SEC and this administration continue to attack the industry and will take all measures possible to slow down adoption,” Rousseau says.

However, Rousseau says the crypto train has seemingly already left the station, and it will be difficult for regulators to slow it down.

“The pace of this industry being attacked has not stopped and the adoption continues without regard [for] these events, which is amazing.”

In addition, the next several weeks may be a critical stage for the U.S. economy. Investors tend to sell stocks, cryptos and other risk assets when they anticipate economic weakness ahead.

In April, the Labor Department reported the consumer price index, or CPI, rose 3.5% year-over-year in March. This was up from a 3.2% year-over-year gain in February and above the 3.4% growth economists were expecting.

Just days later, the Commerce Department reported U.S. GDP grew just 1.6% year-over-year in the first quarter, down from 3.6% growth in the fourth quarter and well below the 2.4% growth economists had expected.

John Glover, chief investment officer at Ledn, says crypto investors will be paying close attention to U.S. economic data and monetary policy.

“The key to bitcoin price performance (a strong proxy for all of crypto) in May will be data releases out of the U.S., with all eyes on inflation data,” Glover says.

“Additional focus will be on the SEC and whether [SEC Chair Gary] Gensler succumbs to pressure to allow for a spot ETH ETF in the U.S.”