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How did the debt ceiling standoff affect the crypto market in May?
Markets have tumbled in fear of a default crisis in the U.S.; President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal raising the government’s $31.4 trillion debt ceiling for two years while capping spending on most items. Regulatory headwinds pushed two of the world’s largest market makers to withdraw from trading digital assets in the U.S. Falling by 5% over the past month, Bitcoin had its share of speculation around its network’s soaring transaction fees, signaling unprecedented congestion. On the upside, Lido was the biggest winner of this month, increasing by 6%. Ethereum’s upgrade unlocking staked ETH has revitalized investor confidence in the cryptoasset. It also boosted demand for protocols like Lido, which saw a 6% increase in net new assets; despite Celsius withdrawing $800M right after the liquidity event. Our dashboards show that Lido processed withdrawals flawlessly to avoid putting additional stress on the activation or exit queue using a buffer of ETH from deposits and rewards.
Figure 1: Price and TVL Development of Major Crypto Sectors
Source: 21shares, Coingecko, DeFi Llama. Data as of May 30 close.
Key takeaways from this report
Bitcoin trials smart-contract functionality while inspiring legacy networks to continue innovating, and Avalanche launches a no-code launchpad to create Web3 applications.
• Lido V2 goes live, enabling withdrawals, Galaxy Digital executes its first on-chain options trade and Tether holds 2% in BTC and continues allocating 15% of net profits to BTC after a strong Q1.
• Another try at borrowing against NFTs, as marketplace Blur launches NFT lending protocol and Binance launches NFT lending feature with zero gas fees.
Read the full report here
Spot and Derivatives Markets
Figure 2: Total Liquidations
Source: Coinglass
On May 10, we saw over $100 million in liquidations after a pseudonymous source tweeted false information alleging that Bitcoin wallets controlled by the U.S. government were on the move. Most positions liquidated were long, as BTC dropped 5% from ~$28,200 to ~ $26,800 in less than an hour (see Figure 2). The market’s overreaction was entirely avoidable. We built a dashboard over two months ago that anyone can access to monitor the U.S. government-controlled wallets in real time and in fact, the assets remained in the wallets.
On-chain Indicators
Figure 3: Percentage of Ethereum in Exchanges
Source: Glassnode
The amount of ETH held on centralized exchanges reached its lowest point in seven years, accounting for only 14% of the total circulating supply. This significant decrease can be traced back to November, when users swiftly withdrew their assets from crypto exchanges due to the collapse of FTX. The trend regained momentum in March, triggered by several banking failures resulting in a sense of distrust in the financial markets. As such, non-custodial staking solutions such as Lido and Rocketpool, benefited from the assets exodus from custodial exchanges.
Next Month’s Calendar
Source: 21shares, Forex Factory, CoinMarketCap
Read full report here
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
- Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
- Bitcoin price technical analysis: Where are the liquidation levels?
- What are real-world assets and why do we need tokenization?
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
Strategy (formerly MicroStrategy) has amassed a staggering $43 billion in Bitcoin, positioning itself at the forefront of the corporate “reserve race.” Under the leadership of Bitcoin maximalist Michael Saylor, the company now boasts an $84 billion market cap. But with such an aggressive strategy, how sustainable is its approach—and what risks lie ahead? We break it down in today’s analysis.
Bitcoin price technical analysis: Where are the liquidation levels?
A drop below $72,000 could flush longs, while a breakout above $90,000 may squeeze shorts. One key positive indicator is that Bitcoin continues to print higher lows since March 10, which preserves a bullish market structure in our view. Dive into our technical analysis.
What are real-world assets and why do we need tokenization?
Imagine owning a slice of a skyscraper or a piece of fine art with just a few clicks. Tokenization, the act of converting ownership rights to real-world assets (RWAs) into tradable tokens, has surpassed $10 billion in on-chain value, unlocking global 24/7 access to once-exclusive markets with liquidity, efficiency, and yield. Find out how it works.
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Since President Trump appointed Mark Uyeda as acting SEC chair two months ago, many investigations into crypto businesses have been dropped, as the SEC moves away from regulation by enforcement and works to create a framework for digital assets. As regulations become clearer and news flow turns more positive, crypto prices—which dropped sharply this week—should begin to better reflect the new regulatory landscape in the US.
We believe this regulatory shift could ultimately help trigger the next leg of the current bull run, as investors better understand the significance of regulatory clarity and seek to acquire bitcoin and altcoins at what we believe are currently very favorable levels.
Market Highlights
SEC Dismisses Crypto Enforcement Actions
The SEC dropped its enforcement actions against crypto-related companies Kraken, Consensys, and Cumberland DRW.
This indicates a shift in SEC’s regulatory approach, favoring clearer guidelines over enforcement actions. Such a pivot could foster a more predictable environment, encouraging innovation within the sector.
Banks to Engage in Crypto Activities
The FDIC has rescinded previous guidelines which prevented financial institutions from engaging with crypto activities without prior sign-off.
By removing bureaucratic hurdles, banks may more readily offer crypto-related services, potentially leading to broader adoption and integration of digital assets.
Bitcoin ETFs Inflow Streak Surpassed $1 Billion
US spot Bitcoin ETFs have recorded a 10-day inflow streak exceeding $1 billion marking the longest such streak in 2025.
This underscores growing institutional and retail investor confidence in Bitcoin as an asset class that helps increase market stability and possibly paving the way for the approval of other crypto-based financial products.
Market Metrics
All NCITM constituents had negative performance last week, with XRP (-10.8%) and UNI (-10.7%) seeing the steepest declines. ETH also experienced a sharp drop (-9.1%), contributing to NCITM’s underperformance relative to BTC (-2.9%). The NCITM -4.2% decline reflects a broader risk-off sentiment in the crypto market, as investors reassess their positions amid ongoing macroeconomic uncertainties.
NCITM (-4.2%) extended its underperformance last week, deepening year-to-date losses. Traditional indices like the S&P 500 (-1.5%) and Nasdaq 100 (-2.4%) saw smaller declines. The gap between crypto and other risk assets continues to widen, while gold has emerged as the top performer in 2025, gaining nearly 20% amid ongoing macroeconomic uncertainties. This trend highlights a growing risk-off sentiment, with investors shifting toward defensive assets and away from high-volatility investments.
Michael Saylor’s bold Bitcoin bet and Strategy’s risk analysis
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