Huobi Growth Academy｜Crypto Market Macro Report: Fed Power Transition, Bond Yields Surge, Liquidity Inflection Point May Be Approaching

1. Warsh Takes Over: Fed Power Transition and Policy Logic Restructuring

On May 15, 2026, Jerome Powell officially stepped down as Chairman of the Federal Reserve, handing over the reins at the end of his term to Kevin Warsh, a Hoover Institution fellow at Stanford University and former Fed Governor. Warsh's nomination was confirmed by a Senate vote of 54 to 45, a relatively close margin that foreshadowed the ongoing pressure his policy stance would face from all sides. On his first day, Wall Street seemingly closed "decorously" with the Nasdaq Composite rising over 1%, but deeper currents of change were already stirring in market pricing.

Warsh's policy agenda revolves around three main directions. First, accelerating the reduction of the Federal Reserve's balance sheet, currently standing at approximately $6.7 trillion. Warsh, critical of this size, advocates for a more aggressive reduction. Accelerated balance sheet runoff effectively drains liquidity from the financial system, pushing up long-term interest rates and tightening the overall monetary environment, exerting systemic pressure on risk assets, including crypto assets. Second, redefining the inflation target system. Warsh questions the authority of the 2% numerical target, leaning towards a more ambiguous "price stability" formulation. This could imply greater actual tolerance for inflation, but also increases policy arbitrariness and makes market prediction more difficult. Third, downplaying forward guidance and the dot plot. Warsh proposes reducing or eliminating predictive tools like "forward guidance" and the "dot plot." The goal is to increase the Fed's policy flexibility, but this would also amplify information friction between the market and the central bank, exacerbating short-term volatility.

For the crypto market, Warsh's stance has a subtle duality. Before being nominated as Fed Chair in January 2026, Warsh publicly stated that Bitcoin is an "important asset" and a "good cop for policy," showing an overall openness to cryptocurrency. However, this moderate stance creates a structural conflict with his immediate pressing tasks: facing a 6% year-over-year surge in PPI in his first month, Warsh must prioritize proving his anti-inflation credibility over promoting crypto-friendly policies. Therefore, in the short term, Warsh's anti-inflation task exerts liquidity pressure on the crypto market. In the long term, his attitude towards digital assets could foster a friendlier regulatory environment for institutional entry into the crypto market. Weighing these factors, the market's short-term focus remains on when the liquidity tightening will materialize, rather than distant regulatory dividends.

2. Bond Market Turmoil: The Alarm of a Global Liquidity Inflection Point

If the change in Fed leadership was merely a disturbance at the expectation level, the concurrent turmoil in the bond market represents a more direct and tangible shock to risk assets. In May 2026, the global bond market experienced a rare sell-off, with government bond yields across multiple countries surging to multi-year or even multi-decade highs. The US 30-year Treasury yield breached the psychological 5% mark in mid-May, reaching 5.12%, its highest level since 2007. The 10-year US Treasury yield climbed in tandem to 4.63%, a rare high in recent years. Japan's 10-year government bond yield hit a 30-year high of 2.797%, the UK's 30-year yield rose to 5.86%, France's 30-year yield reached 4.675%, and even Germany's 30-year yield, long hovering near negative territory, climbed to 3.704%.

The immediate trigger for this global bond sell-off was the surprising US April PPI data. PPI rose 1.4% month-over-month, far exceeding market expectations of 0.3%, marking the largest monthly increase since 2022. Year-over-year, PPI reached 6%, nearly negating three years of the Fed's anti-inflation efforts. As a leading indicator for CPI, the surge in PPI made the market realize inflation wasn't falling back to the 2% target as anticipated, prompting an immediate global repricing of assets. More critically, the expected path for rate cuts was thoroughly broken. Before the sell-off, the market widely anticipated two rate cuts in 2026, with the first in June almost certain. After the sell-off, the probability of a rate cut plummeted to 15%, and expectations even began shifting towards a slight rate hike, with the probability of a 25 basis point hike by July 2027 rising to 60%. The "Higher for Longer" narrative made a comeback.

The surge in bond yields transmits to the crypto market through several channels. First, rising opportunity costs: higher risk-free rates make non-yielding assets like Bitcoin less attractive compared to cash and short-term Treasuries. Second, declining risk appetite: under expectations of tightening liquidity, assets with high beta are systematically sold off. Third, a stronger US dollar: rising real interest rates often accompany a stronger dollar index, placing additional downward pressure on dollar-denominated risk assets. Fourth, the leverage accelerator effect: the market had accumulated significant long leveraged positions in early May 2026, and margin calls triggered forced selling, resulting in a cascading deleveraging waterfall. Data shows that on the day Bitcoin fell to its low of $78,704, over $304 million in leveraged long positions were liquidated market-wide, including approximately $94 million in Bitcoin longs. This series of transmission channels formed the macroeconomic foundation for the recent Bitcoin crash.

3. Bitcoin Crash: The $76K Key Support Defense and Triple Selling Pressure Resonance

In mid-May 2026, Bitcoin experienced a new sharp decline since the start of the year under multiple macroeconomic pressures. It fell from around $82,000 to $76,800, a decline of about 6%, wiping out over $304 million in leveraged long positions market-wide. Notably, the peculiarity of this decline lies in the simultaneous appearance of three selling pressure signals, making it difficult for market participants to simply attribute it to a technical correction.

The first source of selling pressure came from persistent outflows from ETF institutional funds. Starting May 7, 2026, US spot Bitcoin ETFs recorded continuous net outflows, with a single-day outflow of $648 million, the highest since January 29. Cumulative net outflows since May 7 have exceeded $1.5 billion. This scale of institutional capital exodus indicates a fundamental shift in institutional investors' macro pricing logic for Bitcoin. They no longer view Bitcoin as a beneficiary of loose monetary policy but are instead beginning to incorporate it into their traditional risk asset pricing framework for hedging purposes. ETF outflows are both a result and a cause of the decline: price drops trigger programmatic stop-losses, which in turn exacerbate selling pressure, creating a negative feedback loop.

The second source of selling pressure came from simultaneous active selling in both the spot and perpetual contract markets. Glassnode data shows that the Cumulative Volume Delta (CVD) in the spot market plummeted from +$16.9 million to -$126.2 million, and the CVD in the perpetual contract market recorded a significant negative value of -$368.5 million. Both turning negative simultaneously indicates that sellers are actively dumping in both spot and futures markets, rather than being passively liquidated. Historically, this pattern of simultaneous active selling in both markets often corresponds to a more prolonged selling cycle. Passive liquidation is a one-time event, whereas active selling represents the seller's persistently bearish outlook.

The third source of selling pressure came from a sharp increase in hedging demand in the options market. The 25-Delta skew for options rose rapidly from 10.9% to 14.4%, reflecting a significant increase in market participants' demand for downside protection. A higher skew indicates stronger relative demand for put options, an instinctive reaction by institutional investors when exposed to systemic risk. Vikram Subburaj, CEO of India's Giottus exchange, pointed out that Bitcoin's first support level is around $76,000, with a secondary support zone between $74,000 and $75,000. A break below this zone could trigger a deeper pullback. On-chain data shows that the $76,000 to $75,000 range corresponds to the price level before the ETF-driven rally in 2024 and is also a high-volume node for leveraged positions. If this level is lost, technical stop-loss selling could trigger a larger-scale chain reaction.

4. Stagflation Risk Resurgent: The Dual Dilemma of Inflation Stickiness and Slowing Growth

The US April CPI rose 3.8% year-over-year, its highest level since June 2023. PPI surged 6% year-over-year, with a 1.4% month-over-month increase, the largest monthly gain since 2022. The probability of stagflation (a potential stagflationary shock by year-end) jumped from 11% to 40% within a month, and the market's pricing of "stagflation" is rapidly intensifying. The frightening aspect of this data lies not just in the numbers themselves, but in their crippling impact on the Fed's policy space. Traditionally, combating an economic slowdown requires rate cuts, but high inflation prevents the Fed from cutting. Combating inflation requires rate hikes, but signs of slowing economic growth limit the scope for hikes. The Fed is caught in a "lose-lose dilemma," and the persistence of this dilemma is itself the biggest source of market uncertainty.

The impact of rising stagflation risk on the crypto market is particularly complex. From a nominal interest rate perspective, high inflation pushes up nominal rates, raising the risk-free return benchmark and increasing the opportunity cost of holding zero-yield assets like Bitcoin. From a real interest rate perspective, if the rise in nominal rates is less than inflation, real rates could still fall, theoretically providing some support for Bitcoin. However, the peculiarity of this cycle is the Fed's visibly lagging policy response. The market has begun repricing for rate hikes while the Fed is still in a transition period with a new chair. This "policy vacuum" prevents the market from relying on the so-called "Fed put" (the implicit promise of central bank intervention during sharp market declines), amplifying the magnitude of downward volatility.

Simultaneously, global risk assets are experiencing a synchronized decline. South Korea's KOSPI index fell 6.12% in a single day, triggering a circuit breaker. Japan's Nikkei 225 fell 6.22%, the Nasdaq fell 1.54%, and China's Shanghai Composite fell 2.5% over two days. This pattern of synchronized declines across markets indicates that the current adjustment is not an isolated event in the crypto market, but a systemic reflection of global liquidity tightening across various risk assets. The bond market "sounded an alarm" for both the AI bull market and the crypto market. When the "safety cushion" of risk-free rates disappears, all overvalued assets reliant on future discounted cash flows face repricing pressure.

5. Market Structure Observations: Institutionalization Progress and Internal Divergence

Despite the sharp short-term price drop, the institutionalization process of the crypto market has not been interrupted by this adjustment. Galaxy Digital successfully completed the initial phase delivery of its first Bitcoin hash rate-related investment product for institutional clients, delivering the first Phase 1 data hall to CoreWeave on time and on budget. This marks the transition of Bitcoin mining infrastructure towards AI/HPC compute power leasing entering a substantial commercialization stage. The continuation of this structural trend suggests that institutional capital is still systematically increasing its allocation to core crypto assets over a longer time horizon, rather than abandoning its strategy due to short-term volatility.

Meanwhile, the divergence within the crypto mining camp is also intensifying. Keel Infrastructure (formerly Bitfarms) reported a Q1 net loss of $145.4 million with revenue down 23% year-over-year to $37 million. However, its stock price rose over 8% on the day of the earnings release. The market's focus was not on the loss itself, but on whether its 2.2 GW AI/HPC data center development pipeline could be converted into formal leases between 2027 and 2028. The narrative of "swapping Bitcoin mining tail assets for long-term AI infrastructure leases" is becoming the most widely recognized logic among the mining transition camp.

On-chain data also reveals a pattern of divergence: "accumulation amidst panic." Despite significant ETF outflows, the net inflow of Bitcoin to exchanges is accelerating, with approximately $1.68 billion per week flowing into cold wallets. This suggests some long-term holders are accumulating coins at lower prices. The supply held by long-term holders is stabilizing, and the selling of high-cost coins acquired in the $100,000 to $126,000 range is largely complete. This implies that a significant amount of potential selling pressure has been released. Historically, when the derivatives market is at an extremely bearish positioning (30-day funding rate at the 6th percentile, the lowest since early 2023), it often precedes sharp rebounds rather than continued declines. This is because when almost all participants are short, the source of additional selling pressure is limited, but any catalyst for a rebound can trigger massive short covering, providing fuel for a "V-shaped reversal."

6. Conclusion: Three Scenario Analysis and Investment Framework

Looking ahead to late May and June 2026 for the crypto market, the probabilities and trigger conditions for three scenarios warrant close attention. The most likely scenario is "range-bound consolidation." Bitcoin finds technical support in the $75,000 to $77,000 zone, and the market digests macro headwinds while awaiting new catalysts. If bond yields stabilize and the $76,000 support holds, the market could enter a 2-to-4-week consolidation phase, waiting for the next directional signal. In this scenario, the crypto market presents a situation where it "can't fall much, can't rise much," and alpha opportunities will come more from individual coin selection than systematic long positions.

The bullish scenario requires a confluence of two or more favorable factors: First, the Fed or Warsh sending clear easing signals (e.g., a dovish stance from the June FOMC meeting). Second, substantial de-escalation in Middle East geopolitical tensions (the Strait of Hormuz issue returning to the negotiation table). Third, confirmation that April inflation data is trending downwards. If all three conditions are met simultaneously, reignited rate cut expectations could drive Bitcoin to quickly reclaim the $80,000 level and potentially challenge the $85,000 to $87,000 range. The probability of the bullish scenario is currently estimated at around 25%, with the main obstacle being that Warsh is unlikely to pivot quickly towards easing early in his term.

The bearish scenario is the one requiring the most vigilance currently. If the 30-year US Treasury yield continues to climb and effectively breaks through the 5.2% to 5.3% range, the rapid rise in risk-free rates could open the door to a decline into the $74,000 to $75,000 range. A more extreme tail risk involves opening the channel to $54,000 to $38,000 (corresponding to Stifel's trendline analysis target). This would mean a complete retracement of the 2025 bull market gains and a significantly prolonged bear market. The bearish scenario currently has a probability of about 20%, but the risk-reward is asymmetric—once support at $74,000 is lost, programmatic stop-losses could trigger a cascading sell-off, pushing prices below what is fundamentally justified.

In summary, the current market is at a structural turning point where a "macro stress test" coexists with the "deepening institutionalization process." The alarm from the bond market has not subsided, and the $76,000 to $75,000 support zone faces a severe test. However, against the backdrop of extreme pessimism, continued accumulation by long-term holders, and the ongoing narrative of mining transformation, signs of a market bottom are gradually building. Investors at this stage should maintain portfolio flexibility, avoid aggressive chasing or heavy bottom-fishing, and patiently wait for a macro inflection point. Once the "Fed put" becomes effective again and bond yields turn downwards, the next rally in the crypto market will have a more solid macro foundation.