May market update: is caution still the right move in this crypto bear market?

May crypto market update: is caution still the right move in this crypto bear market?

Crypto markets remain under pressure as we enter the eighth consecutive month of the current bear market phase. Bitcoin is trading around $62,500 and Ethereum near $1,675. Both assets are below their long-term 200-day moving averages, which signals that the broader market trend is still weak and that investor confidence has not yet fully recovered. In this update, we break down the key drivers behind the current crypto bear market, what to watch next, and how to position yourself for what comes after.

What triggered the recent Bitcoin decline?

Bitcoin declined from approximately $82,000 to $62,000 within a single month - a drop of roughly 24.4%. This sharp correction weighed heavily on overall market sentiment and contributed to broader selling pressure across crypto assets.

Part of the decline was triggered by concerns surrounding the first reported Bitcoin sale linked to Michael Saylor's Strategy. The direct impact on market liquidity was limited. However, the event created uncertainty and added to the risk-off mood already present in the market.

This is a good reminder of how sentiment-driven crypto can be. A single headline - even one with limited fundamental impact - can amplify an existing downtrend when confidence is already fragile.

Is capital rotating away from crypto?

One factor contributing to the recent weakness in crypto markets is the rotation of capital toward AI-related companies and other high-growth technology investments. Investor interest in artificial intelligence remains exceptionally strong, attracting both institutional and retail capital at scale.

In addition, investors are closely watching several highly anticipated potential IPOs - including companies such as Anthropic and SpaceX. No official dates have been confirmed. However, the anticipation surrounding these opportunities may be temporarily diverting capital away from digital assets.

This does not mean crypto has lost its appeal. It does mean that in the short term, attention and liquidity are being pulled in multiple directions. For crypto investors, this is worth monitoring rather than reacting to.

How is the macro environment affecting crypto?

The broader macroeconomic environment remains challenging. Interest-rate uncertainty, slower economic growth across the US, Europe, and China, and ongoing geopolitical tensions continue to weigh on financial markets globally.

At the same time, global liquidity growth remains mixed. This limits the flow of capital into risk assets such as cryptocurrencies. As a result, conditions are not yet favorable for a sustained recovery across the crypto market.

Historically, Bitcoin and the broader crypto market tend to move in correlation with risk assets during periods of tighter liquidity. For a deeper look at how macro conditions affect Bitcoin specifically, our article on the correlation between equity markets and Bitcoin explains the mechanism in detail.

What is Bitcoin Dominance signalling?

Bitcoin Dominance (BTC.D) measures Bitcoin's share of the total crypto market cap. After reaching elevated levels, BTC.D has started to move lower and currently stands at approximately 58.5%.

Historically, a sustained decline in Bitcoin Dominance signals that capital is beginning to rotate from Bitcoin into altcoins. If this trend continues and BTC.D falls below 55%, it could create conditions for a stronger recovery across the altcoin market.

This is one of the more encouraging signals in the current environment. It does not confirm a recovery - but it is worth watching closely as a leading indicator of where the market may be heading next.

What sectors look well-positioned right now?

Even in a crypto bear market, some sectors tend to hold up better than others - or position themselves for stronger recoveries when conditions improve.

At this stage, two areas appear particularly well-placed. First, AI-related cryptocurrencies continue to benefit from the broader artificial intelligence investment theme. Projects in this space are attracting attention both for their technology and for the structural argument that AI agents will increasingly rely on crypto payment infrastructure - particularly low-fee blockchains and stablecoins - for machine-to-machine transactions. We explored this thesis in more detail in our article on AI and crypto as structural winners.

Second, privacy-focused projects are gaining renewed attention as concerns around digital privacy and financial sovereignty grow. If market conditions improve and capital starts flowing back into crypto, some of these sectors could outperform Bitcoin during the next phase of the cycle.

What is the outlook for medium - to long-term crypto investors?

For investors with a medium- to long-term horizon, the core outlook has not changed. Summer is likely to remain relatively slow and volatile. If historical market cycles continue to play out, we may gradually move into the later stages of the current bear market after the summer period.

That is not a reason to panic. Bear markets are a normal part of every market cycle - and the transition phase that follows them tends to offer some of the best entry points for patient investors. The 4-pillar crypto investment framework we published earlier this year covers this in detail, particularly Pillar 3: building positions during market transitions.

For now, the most sensible approach is to remain cautious, selective, and data-driven. Avoid chasing rallies before trading volume confirms them. Focus on projects with proven multi-cycle track records, healthy tokenomics, and real revenue generation.

To stay up to date, investors can use the free Diamond Pigs Sentiment Dashboard, which combines market sentiment, Bitcoin trends, liquidity indicators, and other key metrics into one easy-to-understand overview.

Key takeaways

• Bitcoin is trading around $62,500 and Ethereum near $1,675, both below their 200-day moving averages, indicating ongoing weakness in the crypto bear market.
• A 24.4% Bitcoin decline in one month was amplified by sentiment around Strategy's reported BTC sale, not by a major shift in fundamentals.
• Capital rotation toward AI companies and anticipated IPOs may be temporarily reducing liquidity in crypto markets.
• Macro headwinds - rate uncertainty, slower growth, and geopolitical tension - continue to limit recovery conditions.
• Bitcoin Dominance at ~58.5% and trending lower could signal early rotation into altcoins if it falls below 55%.
• AI-related cryptocurrencies and privacy projects appear best-positioned for the next phase of the cycle.
• Summer is likely to remain slow and volatile; a data-driven, cautious approach remains the right strategy

Frequently asked questions

Is this a good time to buy crypto during the bear market?
Bear markets can present long-term opportunities, but timing entries is difficult. A data-driven approach - watching indicators like Bitcoin Dominance, global liquidity, and the Fear & Greed Index - tends to produce better results than reacting to price alone. Dollar-cost averaging, which spreads purchases over time, is one way to reduce the risk of entering at the wrong moment.

Why is Bitcoin below its 200-day moving average?
The 200-day moving average is a widely used indicator of long-term trend direction. When Bitcoin trades below it, the broad market trend is considered bearish. Both Bitcoin and Ethereum are currently below this level, which suggests the overall market has not yet shifted into a sustained recovery.

What is Bitcoin Dominance and why does it matter?
Bitcoin Dominance (BTC.D) measures Bitcoin's share of the total cryptocurrency market cap. When BTC.D falls, it typically signals that capital is rotating from Bitcoin into altcoins - often a sign of improving sentiment across the broader market. A drop below 55% is historically associated with stronger altcoin performance.

Which crypto sectors perform best during a bear market recovery?
Historically, sectors with strong fundamental narratives tend to lead recoveries. In the current cycle, AI-related crypto projects and privacy-focused coins are attracting attention. Projects with real revenue, proven teams, and healthy tokenomics tend to outperform during the transition from bear to bull market conditions.

How does Diamond Pigs help investors during a bear market?
Diamond Pigs uses automated, protection-focused bots that actively manage downside risk. During severe declines, bots exit positions to limit losses and re-enter when conditions improve. This is different from passive holding, which exposes investors to the full depth of a drawdown. You can learn more about how the platform works at diamondpigs.com/how-it-works.

When will the current crypto bear market end?
No one can predict this with certainty - and anyone who claims to is guessing. What history shows is that bear markets end gradually, often before sentiment fully recovers. The best indicators to watch are global liquidity trends, Bitcoin on-chain accumulation, and a sustained shift in the Fear & Greed Index toward neutral or positive territory.

Glossary

200-day moving average - A technical indicator that averages a price over the past 200 days. When an asset trades below this level, it is generally considered to be in a long-term downtrend.

Bitcoin Dominance (BTC.D) - The percentage of the total crypto market cap represented by Bitcoin. A declining BTC.D often signals capital rotation into altcoins.

Bear market - A sustained period of declining prices and negative investor sentiment, typically defined as a drop of 20% or more from recent highs.

Dollar-cost averaging (DCA) - An investment approach where a fixed amount is invested at regular intervals, regardless of price. This reduces the risk of buying at a single unfavorable moment.

Risk-off sentiment - A market mood in which investors reduce exposure to higher-risk assets (like crypto) in favor of safer ones (like cash or bonds). Often triggered by macro uncertainty or negative news events.