Bitcoin has seen another strong rally in May, with its latest trading price surpassing the $106,000 mark, edging closer to its all-time high of $108,786 set in January. The rally has been fueled by continued capital inflows into spot Bitcoin ETFs, macroeconomic uncertainty, and rising concerns over inflation, all of which have helped sustain market enthusiasm.
According to crypto data platform CoinGecko, Bitcoin’s price has been steadily climbing over the past two weeks. As of Monday evening, it had broken above $105,700, with intraday highs reaching $106,500—its highest level in nearly four months.
ETF Effect Continues to Drive Institutional-Led Rally
U.S. spot Bitcoin ETFs have emerged as a key catalyst for this latest leg up. Data from SoSoValue shows that as of May 16, net inflows into U.S. spot Bitcoin ETFs have exceeded $2.8 billion for the month, bringing year-to-date inflows to $41.77 billion and pushing total assets under management above $122 billion.
Notably, May 2 alone saw a single-day inflow of $674.9 million, underscoring the growing appetite of institutional investors for Bitcoin exposure. Industry experts note that, unlike previous retail-driven rallies, this uptrend appears more structurally sound. The regulatory clarity and accessibility of ETFs have significantly lowered the barrier for traditional financial investors to enter the crypto market.
Adding to the momentum, Coinbase is set to be added to the S&P 500 Index on May 19. The inclusion not only marks a major milestone for the company but could also act as a broader catalyst for the crypto sector—especially Bitcoin-related assets such as mining stocks and ETFs—by attracting more capital and expanding the upside potential.
Macroeconomic Backdrop Reinforces Bitcoin’s “Digital Gold” Narrative
Beyond technical factors and capital flows, evolving macroeconomic conditions are also providing tailwinds for Bitcoin.
The Federal Reserve has kept its benchmark interest rate in the range of 4.25% to 4.50%, signaling a more cautious policy stance amid mixed economic signals.
However, inflationary pressures remain a concern. With the U.S. reinstating certain tariffs on Chinese imports and major retailers like Walmart warning of price increases, market fears of a potential inflation rebound in the coming months are intensifying.
Walmart CFO John David Rainey noted that tariff-impacted goods are beginning to appear on store shelves, with planned price hikes set to roll out between May and early summer. He described the scale and speed of the increases as “virtually unprecedented in recent history.”
Against this backdrop, Bitcoin’s role as an inflation hedge is gaining renewed recognition. Analysts point out that with real interest rate expectations declining and fiat purchasing power facing uncertainty, crypto assets—particularly Bitcoin—are increasingly viewed as a vital tool for diversification and risk mitigation.
Halving Cycle and Bullish Signals Spark FOMO in Retail Market
Supply-side dynamics are also contributing to Bitcoin’s rally. In April 2024, Bitcoin underwent its fourth halving, reducing block rewards from 6.25 to 3.125 BTC. Historically, Bitcoin has entered an upward price cycle within 6 to 12 months after a halving event.
Coupled with growing social media buzz and key opinion leader endorsements, as well as prices nearing all-time highs, FOMO (fear of missing out) sentiment is surging. On-chain data shows that Bitcoin transaction activity and new address creation have both hit year-to-date highs.
Strong Bullish Sentiment, But Short-Term Volatility Remains a Risk
While market sentiment remains broadly bullish, some analysts caution that a technical correction cannot be ruled out in the short term. Shifts in Federal Reserve policy, evolving global regulatory stances, and potential sell-offs may all pose risks to market stability.
Nonetheless, Bitcoin appears to be solidifying its status within the global asset landscape. As Goldman Sachs noted in a recent report: “Bitcoin is transitioning from a fringe asset to a mainstream allocation tool. Whether it breaks through its all-time high may determine the scale and scope of the next crypto bull market.”