🗒️ Market update

May 2026: When sideways is bullish

In April we asked whether the move off US$60k was a bear-market rally or the cycle low. After a choppy, sideways May, the most informative thing about the month is what didn’t happen.

Bitcoin spent most of May in a tight range around US$75–83k, never seriously threatening the February lows. The tape absorbed a long list of things that, in a weaker market structure, would have triggered another leg down: ongoing Strait of Hormuz uncertainty, a Trump Xi nothingburger, surprise overshoots on CPI and PPI and yields drifting higher. None of it stuck.

In late-stage bear markets, sideways is bullish. The marginal seller exhausts well before the breakout buyer arrives, and price stops responding to bad news. That’s what May looked like. Further validating the bottom was in February.

BTC bounced off the bear market resistance line turning it to support (blue line) and then rejected off the 200 day moving average resistance (green line), and might be lining up another crack at it soon.

What’s still holding under the surface

The structural picture has shifted in some interesting ways through May, and it’s worth being precise about what’s happening:

• ETF flows turned negative on a net basis — roughly -$200m net outflow for the month. The instinct is to read that as fading conviction. We don’t think that’s the right read. The cleaner explanation is mechanical: The outflows are all in the last week or so, aligning with perpetual funding rates flipping positive, reversing the deeply negative regime that defined April. That flip changed the economics of the basis carry — players who were positioned long ETF / short perp to harvest the negative funding had their trade invert, and they’ve been unwinding. ETF outflows of this character are de-leveraging, not directional selling.
• The positive funding regime is itself informative. April’s deeply negative funding was a contrarian signal, the market was paying to be short. That setup has played out. Funding is now reflecting normalisation rather than capitulation-or-mania at either tail.
• MSTR has kept buying, adding roughly 25,000 BTC or $2Billion in May. The STRC mechanism continues to channel structurally counter-cyclical demand into BTC, particularly on weaker tape. This is the cleanest “doesn’t care about funding” buyer in the market.
• Altcoins rallied early in May, a number of Alts outperformed BTC signaling a level of risk on leading up to the Clarity Act making it to and through the Senate Banking Committee in a healthy bipartisan 15-9 vote.
• The next tier of crypto ETFs is finding traction. The HYPE ETFs, only weeks into trading, has seen volumes pick up meaningfully in the back half of May. That matters less for HYPE specifically and more for what it tells us about institutional appetite, the demand for crypto ETFs beyond BTC, ETH, and the incoming SOL products is real, and it’s developing earlier in the cycle than we would have expected.

Where we are in the 5th cycle

It’s worth zooming out, because the loudest commentary right now is still anchored to the 2018 and 2022 cycle troughs. That framing has been costing people money since November.

Every Bitcoin cycle since 2011 has rhymed without repeating. The constants, a four-year issuance halving, capital rotation from BTC into ETH and then down the risk curve, peak-to-trough drawdowns that test conviction, show up reliably but with some nuance. What changes each cycle is who’s buying.

The defining feature of this, the fifth cycle, is the arrival of structural buyers who don’t behave like crypto-natives. MSTR-style treasury programmes, ETF rebalancing flows from advisor platforms (Morgan Stanley, Charles Schwab, Goldman’s product in the pipeline), and the early stages of sovereign-curious demand. These cohorts allocate 2–4%, rebalance into weakness, and don’t liquidate on a 30% drawdown, they buy more. That’s a different reflexivity equation to the one that defined 2018 and 2022.  ETFs provide trusted exposure to BTC, ETH, SOL and now HYPE.

HYPE’s volume has steadily built since launch, making it one of the few clear standouts in a market that’s otherwise in watch-and-wait mode as Iran tensions and inflation pressures reassert themselves.

If you map current price action against the equivalent point in the 2018-19 and 2022-23 cycles, roughly eight to ten months past the cycle peak, with bear capitulation behind you and the first structurally-bid base forming, (exclude the FTX event as a black swan that should not be expected to repeat) you’re at the moment that has historically delivered the strongest forward returns of the entire cycle. Not the obvious moment. The boring one.

We’re in that moment now.

Positioning into the back half of 2026

The short version: starting a DCA programme eight months into the 2018 and 2022 bear markets produced compelling outcomes, even from entries that felt late at the time. The same setup is in front of investors now.

Inside the Digital Asset Fund, Solana remains our highest-conviction undervalued risk asset, and the case got materially stronger in May.

The SEC’s announcement on tokenised equities was, in our view, the most significant regulatory development of the year for the smart-contract platforms. Tokenising equities, putting real, regulated securities onto public blockchains, has been the white-whale use case for institutional adoption since 2018. The SEC’s framing now opens a credible path for that to scale.

The detail that matters for positioning: approximately 96% of current tokenised equity activity is already happening on Solana. Not Ethereum, not the L2 ecosystem — Solana. That isn’t a forecast; it’s where the rails have already been built and where the early issuers have already deployed. Solana now sits in a position where, if tokenised equities scale even modestly from here, it captures the dominant share of a use case that institutional investors actually want.

Combine that with the existing setup, roughly 17% of Ethereum’s market cap, the FTX-estate overhang now small and shrinking, the SOL ETF and structured-product pipeline lining up post-Clarity, and the asymmetry has only widened. Add a few notes from the Q1 Messari Deep Dive:

• Network usage is booming: Daily real user transactions hit a new record of 112.6 million, up 50% from last quarter.
• Apps are still making money: Solana apps brought in $342 million in revenue, even during a weak market.
• Real-world assets are growing: Tokenized real-world assets on Solana grew 43%.
• Tokenized Stocks on SOL – Solana continues to dominate all chains combined in tokenized stock trading volume for the 50th consecutive week. Solana share: ~95.6%
• Stablecoins hit a record: Stablecoins on Solana reached a new all-time high of $15 billion. 77% of USDC Tx happen on Solana.
• Big companies are getting involved: Payments and institutional use expanded, with activity from companies like Visa, Stripe, Worldpay, Western Union, PayPal, Mastercard, and others.
• AI activity is emerging: AI agents are starting to show up on Solana, and adoption of x402 is growing rapidly.
• Solana’s upcoming Alpenglow upgrade aims to make transactions finalize much faster — from about 12.8 seconds today to around 150 milliseconds.

A note on the Bitcoin & Gold Fund: gold spent May consolidating after its strong run, weighed by rising real yields and a softer flight-to-safety bid as peace talks progressed. The BTC/Gold ratio that bottomed on 28 February has continued to trend higher, which is consistent with how we’d expect the debasement trade to unfold from here, gold setting a floor under the macro, Bitcoin doing the heavy lifting on the upside. We continue to view the two assets as complementary rather than competing, and expect to see them moving up in tandem through H2.

Looking through the cycle: why HYPE matters

HYPE is, in our view, the poster child for what we expect this next cycle’s outperformers to look like. A genuinely useful product with real users, generating real revenue rather than narrative. Tokenomics designed to align holders with the protocol’s economics. And, critically, no VC overhang.

That last point is doing more work than it appears to. Many of the last cycle’s high-profile names carried large early-investor allocations whose unlock schedules created persistent supply pressure exactly at the moments momentum tried to build. The end of every previous bull leg has been accelerated by VC distributions on names that, in some cases, no longer had product-market fit at all. HYPE’s distribution simply doesn’t have that problem.

We’re not making a specific recommendation on HYPE here. But it is the template we’re using to scan the broader market as we move through this cycle: real usage, real revenue, clean cap table. The names that fit that template are a much smaller set than the market seems to assume, and they’re where we expect the next round of outperformance to concentrate.

What we’re watching into June

• Clarity Act markup timing. Senate progress slowed in late May but the underlying alignment between banks and crypto on stablecoin yield/rewards appears closer than it was a month ago. If markup lands in June, this is the single biggest regulatory catalyst of the year for ETH, SOL, and the rails layer broadly.
• FOMC comms. Warsh has been very clear, he wants to reduce rates and reduce the Fed Balance sheet, how long until he makes his case for this significant change in operations.  I can’t imagine he will sit on his hands and go with the status quo flow for too long.
• Trump–Xi follow-through. The May meeting set a tone; June will tell us whether anything concrete emerged on tariffs and tech export controls.
• ETF flow re-acceleration. The signal we’d want to see is sustained weekly net inflows above as the bull leg builds.

Individually, none of these are decisive. Collectively, they point to a backdrop that’s incrementally more supportive than current sentiment is pricing.

🗓️ Key dates to watch

• 2 June – ISM PMI
• 3 / 5 June – JOLTs & Non Farm Payrolls
• 10/11 June – CPI/PPI
• June – Clarity Act mark up

The Case For Long Term Accumulation

Most investors say they want to buy Bitcoin when prices are low. Very few actually do. In our latest presentation, Ryan McMillin, CIO of Merkle Tree Capital, breaks down what would have happened if an investor consistently accumulated Bitcoin throughout the 2018 and 2022 bear markets using a disciplined dollar cost averaging (DCA) approach.

The presentation explores:

• Historical Bitcoin drawdowns
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  • Investor psychology during periods of extreme fear
  • Why bear markets often create the best long-term opportunities

For investors thinking seriously about long term digital asset exposure, this is a practical and data driven discussion worth watching.

TL;DR

The periods that felt worst to invest in Bitcoin historically produced some of the strongest long term outcomes.

This presentation breaks down how disciplined DCA investing performed throughout the 2018 and 2022 bear markets using real historical data.

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