No rate cuts in sight + good news priced in, will BTC test the market bottom again?

Original author: Ma He, Foresight News

On May 18, Bitcoin continued its decline to below $77,000, marking its fourth consecutive daily drop. Ethereum also fell to around $2,100, with major cryptocurrencies like Solana and XRP broadly declining. Data from Coinglass shows that total liquidations across the network reached $657 million in 24 hours, with long position liquidations accounting for $584 million.

Most of these liquidated positions were long bets placed above $80,000. Once the price broke through this psychological threshold, algorithmic trading systems and institutional risk control protocols automatically triggered sell-offs, forming a classic liquidity spiral. According to CoinMarketCap data, the Crypto Fear & Greed Index fell back to 39 today, indicating panic in the market.

The macro environment is equally unforgiving to the crypto market. The US 10-year Treasury yield remains near 4.43%, S&P 500 futures are down 0.19%, and Nasdaq 100 futures have fallen 0.29%. The Dow Jones Industrial Average is down 0.29%. Most of the "Magnificent Seven" tech stocks have reported Q1 earnings, with many exceeding expectations, especially in AI-related revenue. Nvidia's earnings are scheduled for release after the market closes on Wednesday, May 20.

The situation in the Middle East—particularly the risk of a blockade in the Strait of Hormuz—is driving energy prices to new highs. According to Bitget data, Brent crude oil has risen to $112.9. The risk correlation between traditional markets and the crypto market has been starkly evident this week: as expectations for dollar liquidity tighten, Bitcoin's nature as a high-risk asset is being amplified, rather than its safe-haven function as "digital gold."

No Hope for Fed Rate Cuts

The core macro driver behind this decline is a complete reassessment of expectations for Federal Reserve monetary policy. At the FOMC meeting concluding on May 1, the Federal Open Market Committee voted 10-2 to maintain the federal funds rate within the range of 3.50% to 3.75%. More critically, this was the meeting with the most dissents since October 1992—three regional Fed presidents publicly opposed the "dovish bias" implied in the post-meeting statement.

Neel Kashkari

Minneapolis Fed President Neel Kashkari is the most representative voice among them. As a voting member of the FOMC in 2026, Kashkari stated clearly in an interview with CBS's *Face the Nation* on May 3 that due to the energy price shock from the Iran war, "everyone needs to have an open mind now on the path of rates. If things get worse, we may need to move in the opposite direction"—meaning rate hikes rather than cuts. He specifically noted that the longer the Strait of Hormuz is closed, the greater the imported inflationary pressure on the US, and the Fed must defend the credibility of its 2% inflation target.

DoubleLine Capital CEO Jeffrey Gundlach explicitly stated that the possibility of the Fed cutting rates this year has essentially vanished, with stubborn inflation and signals from the rate market jointly blocking the path to monetary easing.

On May 18, according to Bloomberg, Gundlach said in an interview on Fox News' *Sunday Morning Futures* that the market had previously expected two rate cuts this year, but inflation data has consistently failed to cooperate. He bluntly stated, "With the two-year Treasury yield nearly 50 basis points above the federal funds rate, a rate cut seems utterly impossible to me."

Previously, the US April CPI jumped 3.8% year-over-year, the fastest pace since May 2023, and Gundlach warned that the next CPI data will "start with a 4."

Meanwhile, the Iran war is driving oil prices significantly higher, further transmitting into US inflation data and exacerbating an already difficult price pressure situation. Gundlach also warned of multiple market risks, including high stock valuations and private credit risks, suggesting overall market risk is quietly accumulating.

Additionally, Israeli media reported on May 17 that Israeli Prime Minister Benjamin Netanyahu and US President Donald Trump spoke by phone that day to discuss the possibility of resuming military action against Iran. The phone call between Netanyahu and Trump lasted about half an hour, primarily discussing the potential for resuming military strikes against Iran. The official stated that if the US resumes military action against Iran, it is expected that Israel and the US will launch joint airstrikes.

Kalshi's latest data shows that the market probability of the Fed holding rates steady this year has risen to 66.9%, while the probability of one rate cut has fallen to 17.8%.

For the crypto market, this could mean the official end of the "rate cut narrative" that has persisted for over two years.

Historically, every major Bitcoin rally has been accompanied by Fed balance sheet expansion or a decline in real interest rates. With this liquidity engine stalling, BTC bulls have lost their most reliable macro moat.

CLARITY Act Passes Committee: 'Buy the Rumor, Sell the News'

In the early hours of May 15 Beijing time, the US Senate Banking Committee passed the CLARITY Act by a vote of 15-9. This is the first legislative draft in US history to establish a comprehensive regulatory framework for digital assets. The bill clearly delineates the SEC's jurisdiction over token offerings and the CFTC's jurisdiction over secondary market trading, ending the era of "regulation by enforcement" that lasted for years. Major industry participants like Coinbase and Circle expressed support for the bill's compromise provisions on stablecoin yields.

However, the market's reaction was a textbook case of "buy the rumor, sell the news." Before the committee's vote, BTC briefly rose to $82,000, but quickly fell to $78,000 after the bill passed.

Subsequently, it declined for four consecutive days, once falling to $76,735.

Before the bill passed, regulatory clarity was already priced in. Furthermore, provisions in the bill regarding DeFi developer responsibilities, restrictions on stablecoin yields, and anti-money laundering standards actually increase compliance costs.

From an emotional indicator perspective, this behavior of selling on good news has been fully validated.

Santiment stated that following the news of the Senate Banking Committee advancing the CLARITY Act, Bitcoin created a wave of intense social media hype. This brings BTC and cryptocurrencies one step closer to final passage. Historically, when bullish comments about crypto market cap outnumber bearish ones by a ratio of 1.55, caution is advised. Market trends often run counter to mass expectations.

Santiment believes any move to pass the CLARITY Act should be considered a net positive for crypto in the long run, as it could ultimately bring clearer rules for the US crypto industry. However, it added that it wouldn't be surprising if the market value of many top cryptocurrencies was already "priced in" before the CLARITY Act officially takes effect.

Institutions Using Bounces as Exit Opportunities

On May 14, glassnode reported that the 7-day simple moving average of net inflows into US spot Bitcoin ETFs fell to -$88 million per day, the largest outflow since mid-February. The outflows in February occurred during a period of price weakness. This wave of selling is happening during a period of price strength, with BTC trading near $80,000.

Institutional participants are using the recent bounces as an exit opportunity, rather than reacting out of fear.

According to SoSoValue data, since May 7, Bitcoin spot ETFs have seen net outflows totaling hundreds of millions of dollars. On May 13 alone, the net outflow was $635.23 million, a new single-day high for months.

With continuous capital outflows, Bitcoin's upward price momentum is weakening.

Outlook for the Next Move

BitMEX co-founder Arthur Hayes wrote a few days ago, predicting that dollar and yuan liquidity will continue to rise, and Bitcoin and cryptocurrencies will benefit. Bitcoin bottomed around $60,000 earlier this year, and with the tailwind of trillions of dollars and yuan about to be created, he believes recapturing $126,000 is a foregone conclusion. Many skeptics will refuse to participate in this Bitcoin rally because it has significantly lagged behind tech stocks and gold over the past 24 months. Many cannot understand Bitcoin's relevance as a hedge against rampant money printing. However, it will demonstrate its sensitivity to fiat liquidity expansion.

Hayes expects the rally to accelerate, predicting that once Bitcoin breaks $90,000, many bearish option sellers will rush to cover their positions, making the price trajectory explosive. He claims he has no idea how high Bitcoin can go but will push Maelstrom's portfolio to maximum risk unless there are drastic changes.

MicroStrategy founder Michael Saylor opted for a simpler expression. On May 17, he again posted information related to the Bitcoin Tracker.

Weiss Crypto analyst Juan M. Villaverde stated that he does not believe BTC will drop significantly from current levels, but rather pull back moderately, with the $70,000 support level expected to hold. A notable low point might appear before the end of July this year.