May 2026 in Crypto: Sell In May And Go Away?

91 Days And Counting

Despite continued optimism that a US-Iran deal was forthcoming — initially fuelled by another “Trump Always Chickens Out” (TACO) policy reversal (see image below) followed by social media posts from the US President stating that an agreement has been “largely negotiated, subject to finalization” — May ended as it began, with the Iran conflict still unresolved. Now approaching the 100-day mark since the first airstrikes were launched, this geopolitical crisis remained the dominant driver of both digital and tradfi asset markets last month.

Yet Another Trump TACO

Source: Truth Social

Critically, the flow of shipping through the Strait of Hormuz remains substantially below pre-war levels, with the question of who controls the narrow waterway still contested. Last month’s launch of Project Freedom, a US-led naval escort initiative designed to secure shipping routes, lasted barely 24 hours before President Trump paused it. Ostensibly, the pause was in response to “great progress” being made towards reaching a comprehensive ceasefire agreement with Iran.

More likely, however, the pause reflected Iran’s demonstrated ability to retaliate against neighbouring Gulf states following US strikes on Iranian ports and vessels. Tehran’s resumption of missile and drone attacks highlighted that it still retained the capacity to project power beyond its borders, thereby preserving significant geopolitical leverage.

Adding to confusion over who ultimately controls the Strait, the day after Trump announced the pause of Project Freedom, Iran created the “Persian Gulf Strait Authority”, a new government agency tasked with administering the tolls charged by the IRGC for securing safe passage through the waterway (it even has its own X account — @PGSA_IRAN). This was followed a few days later by a report from Fars, an Iranian news agency, detailing the launch of a digital insurance platform named Hormuz Safe, offering marine insurance policies as well as financial liability certificates with cryptographically verifiable confirmations for shipments passing through the Persian Gulf, the Strait of Hormuz and surrounding waterways.

According to analysis by the Iranian Ministry of Economy, the toll could generate annual revenue of more than $10bn — or perhaps more appropriately, more than 130,000 BTC — because, as suggested previously, payments will reportedly not be made in US dollars but Bitcoin (we covered this topic in more detail in our April monthly update).

The choice of Bitcoin is hardly a surprise. After the Iranian central bank reportedly had $344mn worth of USDT frozen by Tether earlier this year, Tehran has strong incentives to move strategic financial flows beyond the legal reach of the US government and the traditional US dollar banking system. More broadly, the episode highlights Bitcoin’s core strategic characteristics: unlike centralized digital dollar substitutes, it cannot easily be frozen, censored or confiscated by a foreign state actor.

Once Bitten…

Source: X

A “Strait” Jacket

Iran’s attempt to levy a toll on vessels passing through the Strait of Hormuz is highly contested not only politically and operationally, but legally. According to the 1982 UN Convention on the Law of the Sea (UNCLOS), all ships and aircraft are granted “the right of freedom of navigation and overflight for continuous and expeditious transit through straits used for international navigation.” Iran argues that because it never ratified UNCLOS, it is not bound by such rules.

In an attempt to weaken the credibility and commercial viability of Hormuz Safe and related toll collection mechanisms, on May 27 the US Treasury imposed sanctions on the Persian Gulf Strait Authority as part of its Economic Fury programme accusing it of maritime extortion. (How effective US sanctions would be if the toll fees are paid in unbannable Bitcoin is an interesting thought experiment?)

The sanction announcement came hours after Iranian state TV claimed that Tehran had a draft Memorandum of Understanding (MoU) to extend their current ceasefire and launch formal peace negotiations the key terms of which were: Iran would agree to clear the mines it deployed in the Strait and restore commercial shipping through it to pre-war levels within 30 days; traffic through the Strait would be jointly managed by Iran and Oman. Tehran further proposed that any final deal be enshrined as a binding UN Security Council resolution within 60 days. In exchange, the US would lift its blockade on Iranian ports and issue some sanctions waivers to allow Iran to sell oil. There were also reports in the New York Times of a $300bn redevelopment fund for Iran being including in the terms of the proposed deal of – an eye wateringly large sum. This is the political carrot.

The problem is that Tehran holds the stick. Its real leverage derives from its continued ability to harass or slow shipping through the Strait. It is estimated that Iran has retained roughly 70% of its pre-war missile stockpile and restored operational access to around 90% of its missile sites along the Strait of Hormuz. Consequently, there appear to be limited options available to the US and its allies for preventing Iranian interference with shipping through the waterway short of a much broader military escalation, potentially involving operations against Iranian coastal infrastructure and missile sites.

The Trump administration is very reluctant to pursue this option because of the risk of becoming entangled in another Middle Eastern “Forever War”, something the Iranian negotiators are only too well aware of. Moreover, Iranian officials and military spokespeople have threatened retaliatory action in the form of missile and drone strikes against US naval forces, regional military bases and Gulf energy and desalination infrastructure if the US were to deploy ground troops or directly attempt to secure parts of the Strait.

Peace On, Peace Off

Optimism that the US-Iran conflict was nearing resolution faded rapidly, however, after the White House dismissed the Iranian media reports as “not true” and claimed that “the MOU they “released” is a complete fabrication” – see image.

Truth – The First Casualty of War

Source: X

The White House denial is a reminder that in this conflict, the information war is being fought as aggressively as the military one — and that both sides have strong incentives to shape the narrative around the state of negotiations because each needs to present it as a victory for their side.

Adding to negativity, during a televised Cabinet Meeting, President Trump reiterated that Iran would not receive sanctions relief in exchange for surrendering its stockpile of enriched uranium. He also made clear that the regime could not be allowed to possess a nuclear weapon. Combined with renewed US military strikes against Iranian targets following the interception of drones launched by the regime, these developments shattered investor confidence that a deal was imminent.

This sharp reversal in sentiment pushed the Crypto Fear and Greed Index back into extreme fear territory as a broader risk-off move swept across global asset markets and crude oil prices rebounded. Digital assets subsequently suffered one of their sharpest single-day sell-offs of the year, with the largest cryptocurrencies experiencing the heaviest declines. Bitcoin fell below $73,000 (a monthly low) while Ethereum dropped through the $2,000 level for the first time since March. Total crypto liquidations reached approximately $934 million over a 24-hour period. Notably, Ethereum futures open interest reached a record high during the move, suggesting that the sell-off was not purely driven by bullish capitulation and that aggressive new positioning may also have been involved.

Deal Or No Deal?

It says much about the character of these negotiations that within 24 hours the diplomatic picture had shifted entirely once more, with news headlines dominated by reports that both sides had “reached an agreement in principle” to extend the ceasefire, reopen the Strait of Hormuz within 30 days and begin formal negotiations on Iran’s nuclear programme — terms strikingly similar to those contained in the earlier “fabricated” MoU. Apparently, all that remained was formal sign-off from the leaders of both countries. Having been repeatedly wrong-footed by previous headlines of an “imminent” breakthrough, crypto investors reacted cautiously.

This cautious stance is certainly warranted because the underlying strategic tensions are real. Joint management of the Strait by Iran and Oman – as proposed in the MoU – would be extraordinarily controversial (almost as controversial as Trump’s threat to “blow up” Oman, a long standing US ally, if they do not behave)¹. It also would set a deeply uncomfortable precedent potentially emboldening other regional powers to impose similar restrictions or charges in strategically important waterways.

Moreover, it is extremely difficult for the US to claim strategic success if Tehran retains any practical ability to influence which vessels can safely transit the Strait. Such an outcome would risk reinforcing perceptions that US capacity to enforce global maritime order has become more constrained than in previous decades.

There is also an open question as to whether a temporary ceasefire agreement can be transformed into something more permanent. The most contentious issue remains Iran’s enriched uranium stockpile². Echoing longstanding Iranian demands from previous nuclear negotiations, and highlighting the lack of trust between the two parties, Iran insists that no action will be taken without “tangible verification”. The sequencing dispute, in which each side expects the other to move first, has derailed prior talks.

Hence, for the Strait of Hormuz to fully reopen permanently, which is what investors are hoping for, the nuclear issue must be resolved.

Wen Permanent Peace?

Source: Polymarket

Operation Chokepoint 3.0³

As a result of the continued throttling of the Strait of Hormuz, global crude oil supplies remain around one-fifth lower than before hostilities began. In magnitude, this supply shock is roughly double that seen during the Arab oil embargo in 1973, the Iranian Revolution in 1979 or the first Gulf War in 1990. In each of those cases, crude oil prices approximately doubled. The price impact this time around, while still substantial, has thus far been more modest by comparison.

There are several reasons for this.

The first is investors’ continued conviction that the conflict will ultimately be resolved within the next “few weeks”, even though the alternative NACHO (“Not A Chance Hormuz Opens”) scenario gained traction mid-month, which contributed to oil prices spiking above the $100 mark.

The second is that China has been importing materially less crude oil than prior to the outbreak of hostilities. Indeed, Beijing recently repealed restrictions on the export of refined products, suggesting domestic supply conditions remain relatively comfortable. At first glance this seems counter-intuitive, particularly as several Asian economies have begun rationing fuel supplies. However, it increasingly appears that prior to the conflict China had already been accumulating substantial strategic crude inventories, estimated at roughly 1.4 billion barrels.

The third factor is that governments have aggressively tapped strategic reserves in an attempt to cushion the supply shock and stabilize energy markets. The problem, however, is that global oil inventories continue to decline at an unprecedented pace.

The Clock Is Ticking

By the end of next month, total inventories are predicted to fall to around 7.6 billion barrels. With global crude oil consumption estimated at approximately 100 million barrels per day, such inventory levels may initially appear to provide a comfortable cushion. However, a substantial proportion of global inventories are operationally required within pipelines, storage systems and refining infrastructure. Below certain thresholds, physical dislocations begin to emerge across the supply chain as logistical systems become increasingly strained.

The minimum operational inventory level is thought to be around 6.8 billion barrels — a threshold that may be reached by September if the Strait remains effectively impaired, and potentially sooner in parts of Asia and Europe. Should inventories continue falling toward these minimum operating levels, the risk is that sections of the global energy system begin to experience operational bottlenecks, exacerbating the supply shock and increasing the likelihood of more persistent energy inflation.

World Oil Inventories Are Falling At A Record Pace

Source: Bloomberg

While the US and Iran wish to avoid both a full regional war and a catastrophic global energy shock, if neither side
is prepared to concede their core demands, especially in relation Iran’s stockpile of enriched uranium, the whole thing could still fall apart because as Iran’s deputy secretary of the Supreme National Security Council, echoing the language used by EU officials during the Brexit negotiations, warned “nothing is agreed until everything is agreed”.

All Or Nothing

Source: X

Fed Transition

Against this increasingly difficult macro backdrop, G7 central banks adopted a cautious wait-and-see approach at last month’s policy meetings. While decisions to leave interest rates unchanged projected an appearance of stability, underlying tensions are clearly mounting. Nowhere was this more evident than at the Fed.

The decision to leave the federal funds rate unchanged in May proved contentious, with four members of the 12-strong committee dissenting from the statement — the highest level of dissent in more than three decades. Three members opposed the statement’s easing bias, while Trump appointee Stephen Miran voted in favour of an immediate 25bp cut.

In explaining the committee’s decision, Powell — who chaired his final meeting as Fed Chair — described inflation as “elevated”, a stronger characterization than in the previous statement, while also warning that higher oil prices were beginning to feed into inflation expectations. Such so-called second-round effects are particularly concerning for central bankers because they risk embedding inflation more persistently into the broader economy.

These concerns were subsequently validated by hotter-than-expected US CPI data. Headline inflation rose to 3.8% year-on-year in April, up 0.5 percentage points from the previous month and marking a four-year high. Higher gasoline and grocery prices contributed materially to the increase. More importantly though, core CPI — which excludes these more volatile categories — also surprised to the upside at 2.8% year-on-year.

On both measures, inflation remains materially above the Fed’s 2% target, with pipeline pressures likely to intensify given the sharp increase in producer prices observed last month. Against this backdrop, the Fed’s last dot plot projecting two 25bp rate cuts increasingly appears outdated. Instead, the balance of risks now points toward a more hawkish policy path than markets had anticipated only a few months ago.

Powell Stays

The split vote was not the only surprise from the May Fed meeting. During his final post-meeting press conference as Chair, Powell announced his intention to remain on the Fed Board. While he is legally entitled to do this, at least until January 2028, his decision is contrary to historic norms.

Powell justified the decision by pointing to growing political attacks on the central bank — particularly from President Trump — which he believes risk undermining institutional independence. By remaining on the Board, Powell also limits Trump’s ability to appoint an additional dovish governor likely to support Miran’s push for lower rates.

This is another reason to think the Fed may ultimately prove less dovish than investors initially expected when Kevin Warsh was first nominated as Powell’s replacement.

The diminished prospect of easier US monetary policy in the months ahead has helped push long-term Treasury yields toward levels rarely seen since in the years since the 2008 global financial crisis — moves mirrored across other major sovereign debt markets globally. Such monetary dynamics represent clear short-term headwinds for digital assets, equities and other duration-sensitive risk assets. Certainly, it contributed to the 3% drop of our flagship Top 10 Crypto CTI last month.

Another potential source of near-term volatility is uncertainty surrounding how the Fed may operate under Warsh relative to Powell. Historically, periods surrounding Fed Chair transitions have not been especially favourable for digital assets. As highlighted by the X account @WhaleNoName, Bitcoin experienced substantial (30%+) drawdowns during the early weeks of each of the new Fed Chair terms as shown in the table below.

Source: Author calculations

(*) Yellen and Powell in his first term were sworn in early in the month so the returns shown are calendar months. For his second term Powell was sworn in on May 23, 2022 so the return shown is the 30 day return instead.

Admittedly, the sample size is extremely small and conclusions should therefore be treated cautiously, but the historical pattern is nonetheless notable. Does this mean that crypto investors should pay heed to the old market adage “Sell in May” and dump their bags?

One can never rule out a short-term pullback, especially given the elevated degree of geopolitical and macroeconomic uncertainty currently prevailing. However, it is worth noting that at the same time the longer-run structural case for digital assets continues to strengthen, so selling in May and going away might not be the smartest move.

Crypto Clarity

The month’s most consequential regulatory development came on May 14, when the US Senate Banking Committee advanced the CLARITY Act by a 15-9 vote, sending it to the full Senate floor. Two Democrats, Ruben Gallego of Arizona and Angela Alsobrooks of Maryland, crossed the aisle, providing the bipartisan cover the bill’s sponsors needed.

The CLARITY Act does what the crypto industry has been requesting since its inception: it draws a clear regulatory line between the SEC and the CFTC, establishing a defined decentralization test to determine whether a digital asset should be treated as a security or a commodity. This matters enormously for institutional adoption. Heavily regulated tradfi players — pension funds, insurance companies, sovereign wealth funds — cannot meaningfully allocate to an asset class whose legal status remains contested. The bill’s passage through committee does not resolve that uncertainty, but it moves the dial in the right direction.

That said, the road ahead is not trivial. Sixty votes are needed to pass the full Senate — a cloture threshold that demands bipartisan support well beyond the two Democrats who voted in committee. An ethics provision, requiring disclosure of government officials’ crypto holdings and limiting their ability to profit from the industry, remains a sticking point. Senate Democrats have said it is non-negotiable. The White House position — that any rules should apply uniformly without singling out a specific officeholder — is not something the Democratic caucus has found persuasive.

Hence, the bill could “fail” if the August legislative window is missed before lawmakers exit for the midterm election season. According to online prediction platform Polymarket the probability of it passing this year stands at 60%.

As with the Strait of Hormuz, the clock is ticking.

Strategic Reserve Tease

Another potentially important long-term bullish catalyst relates to the US Bitcoin Strategic Reserve.

It has now been more than a year since the Trump administration formally established the reserve via executive order, making it the world’s largest government-held crypto reserve. Initially, however, investor enthusiasm was tempered because the reserve consisted primarily of bitcoin previously acquired through criminal and civil asset forfeitures rather than through direct market purchases. Moreover, last July’s White House crypto policy report contained no plans to expand the reserve through active acquisitions.

Things may now be changing.

During the Bitcoin 2026 conference in Las Vegas, Patrick Witt, executive director of the President’s Council of Advisors for Digital Assets, told attendees to expect a “big announcement” in the coming weeks. Witt indicated the inter-agency custody and reporting framework is now in place — clearing the main legal obstacle that had prevented the government from properly consolidating its seized Bitcoin holdings.

At the same conference it was also revealed that Senator Cynthia Lummis’ BITCOIN Act would be renamed the American Reserves Modernization Act. The legislation seeks to formally codify the digital asset reserve framework by establishing guidance on storage, custody, access and holding periods, thereby placing digital assets on a footing more comparable to gold and other strategic reserve assets held by the US. Importantly, the proposal also includes plans to acquire up to one million bitcoin over five years using so-called “budget neutral” financing strategies, potentially creating a significant new source of structural demand for the seminal cryptocurrency.

Combined with Iran’s Hormuz Safe initiative, these developments suggest that sovereign engagement with digital assets may be entering a new phase. The deeper significance is not simply that governments are buying or experimenting with crypto assets, but that geopolitical fragmentation is increasing demand for politically neutral settlement and reserve assets outside the traditional USD-based financial architecture.

In that environment, crypto’s neutrality, censorship resistance and independence from state-controlled payment systems become increasingly valuable strategic characteristics rather than merely ideological ones.

So where does this leave digital assets?

Despite optimism pertaining to a US-Iran deal, there is still quite a gap between both sides and if a major supply crunch is to be avoided the window for reaching a deal is rapidly closing. Moreover, macro conditions are already challenging with higher energy prices, persistent inflation pressures and the prospect of tighter monetary policy weighing on global liquidity conditions and risk appetite more broadly. Near-term volatility and periodic drawdowns across digital asset markets, therefore, cannot be ruled out.

Yet beneath this cyclical uncertainty, the longer-run structural case for digital assets appears to be strengthening. As sovereign actors increasingly seek reserve and settlement alternatives less dependent on the traditional US dollar-based financial system, Bitcoin in particular is becoming harder to dismiss as merely a speculative asset class. Instead, it is increasingly emerging as a form of politically neutral financial infrastructure for an increasingly fragmented world order.

1 Like many others, I initially thought that Trump had misspoken and meant Iran, but the White House subsequently released a clip on social media including this threat, thereby removing such doubts.

2 Israel’s continued strikes against Hezbollah in Lebanon is another thorny issue that will have to be included in any agreement as well.

3 Operation Choke Point 2.0 refers to allegations that US federal regulators are pressuring banks to sever ties with the cryptocurrency industry, mirroring a 2013-2017 Obama-era initiative (the original Operation Choke Point) targeting lawful industries.