U.S. inflation continued trending toward the Federal Reserve’s 2 per cent target in May, with headline PCE inflation at 2.3 per cent and core PCE at 2.6 per cent year over year. However, core services inflation remained sticky, reflecting underlying pressures in shelter and wage-related components. According to the May 6 to 7 FOMC minutes, policymakers viewed upside inflation risks, particularly from persistent services price pressures, as nearly balanced by emerging downside risks in the labor market. While the job market remained strong overall, the Fed acknowledged growing uncertainty around payroll growth and broader economic momentum. The federal funds rate was held steady at 4.25 to 4.50 per cent, reaffirming the Fed’s data-dependent stance as it monitors both inflation progress and labour market resilience. 

The United States and China agreed to a 90-day suspension of certain tariffs enacted earlier that year. Under this agreement, U.S. tariffs on Chinese imports were reduced from as high as 145% to 30%, while China lowered its tariffs on U.S. goods from 125% to 10%. This temporary truce aimed to provide relief to exporters, particularly in sectors like electronics and solar-panel manufacturing, allowing them time to adjust to currency fluctuations and reconfigure supply chains. However, tensions resurfaced as U.S. officials accused China of not fully complying with the agreement, particularly concerning the slow reissuance of export licenses for critical minerals essential to various industries. China refuted these claims, asserting that it was adhering to the terms of the deal. This situation underscored the fragility of the truce and the complexities involved in U.S.-China trade relations. 

Japan’s 40-year government bond yields surged to 3.675 per cent, the highest on record, after a weak debt auction signalled declining demand from domestic institutions like life insurers and pension funds. This spike reverberated across global markets, coinciding with a rise in U.S. 30-year Treasury yields as investors demanded higher compensation for long-duration risk. It also disrupted the yen carry trade, a strategy where investors borrow low-yielding yen to invest in higher-yielding foreign assets by raising domestic borrowing costs and reducing the profitability of these trades. As yields rise in Japan, investors are less incentivised to seek returns abroad, leading to potential repatriation of capital. This not only weakens demand for foreign bonds, such as U.S. Treasuries, but also exerts upward pressure on global yields. The weakening yen further complicates matters by increasing the cost of servicing foreign-currency debt. 

BITCOIN (BTC)

Bitcoin broke above its previous all-time high of $108,000, reaching a new peak of $111,814 as it tracked the global expansion of M2 money supply, which surpassed $111 trillion. The macro liquidity backdrop provided strong early-month tailwinds, reinforcing Bitcoin’s narrative as a hedge against fiat debasement. For several days, price action held between the $108,000 resistance and the $120,000 zone, forming a rising wedge—a typical sign of buyer exhaustion. Technical indicators reflected this slowing momentum: the RSI cooled from overbought levels into neutral territory, and the MACD line crossed below its signal line just as Bitcoin struggled to maintain elevation above prior highs. 

By mid to late May, the momentum faded further as geopolitical tensions reemerged. The reintroduction of U.S.–China tariff escalation risks, along with the EU’s new probe into Chinese tire dumping, signalled growing protectionist pressure in global trade. These developments injected uncertainty into risk markets, dampening investor sentiment and slowing Bitcoin’s ascent. The price eventually broke below the wedge’s lower trendline and retraced toward $103,000, with the 200-day moving average near $94,800 emerging as the next major support. As macro tailwinds gave way to geopolitical friction, Bitcoin’s breakout rally gave way to consolidation, potentially setting the tone for a more cautious start to June. 

In the week ending May 23, U.S. spot Bitcoin ETFs logged $25 billion in trading volume, the highest weekly total of 2025 to date and net inflows of $2.75 billion, more than double the comparable week in 2024. BlackRock’s IBIT fund led this surge, maintaining a 30-day streak without any outflows and attracting $430 million on May 23 alone. Moreover, spot ETFs recorded their largest inflows since early 2025, reflecting growing institutional confidence.  

Those sustained ETF inflows are reshaping Bitcoin’s supply-demand dynamics. Spot ETFs now manage over $131 billion in assets under management with institutional allocators, pension funds, endowments, and family offices increasingly viewing Bitcoin as a liquid, investable asset rather than a speculative hedge. As a result, realised volatility has shown signs of moderation, even as futures open interest reached record highs near $80 billion. Looking ahead, continued capital inflows via ETFs could help dampen sharp drawdowns, although any abrupt shift in monetary policy or regulatory guidance remains a key risk  

ETHEREUM (ETH)

Ether (ETH) delivered a remarkable monthly return of approximately 43.77%, outpacing Bitcoin’s roughly 11% advance over the same period. U.S. spot Ether ETFs recorded cumulative net inflows of $493 million by month’s end, underscoring growing institutional demand. Analysts note that Ethereum’s ETH/BTC ratio formed bullish technical patterns—such as a cup‐and‐handle—suggesting the potential for further upside relative to Bitcoin. This strong relative performance likely reflects both macro tailwinds for digital assets and specific network developments that have rejuvenated Ethereum’s growth narrative.  

Ethereum successfully activated its Pectra upgrade, raising the maximum stake per validator from 32 ETH to 2,048 ETH. By enabling large stakers to consolidate multiple smaller validators into a single “mega‐validator,” Pectra streamlines operations and reduces network overhead, as fewer overall validators are needed to secure the chain. This change not only lowers hardware and maintenance requirements for institutional operators but also unlocks true reward compounding: stakers can reinvest earned rewards directly into a single validator instead of managing dozens of separate 32 ETH nodes. Additionally, EIP‐7002 introduced execution‐layer withdrawals, allowing validator exits and partial withdrawals to be triggered on‐chain without requiring separate validator keys. These enhancements promise to improve staking liquidity, particularly relevant as larger staking pools and liquid‐staking protocols explore restaking strategies that permit staked ETH to be reused within DeFi lending and yield products.  

Institutional engagement with Ethereum broadened significantly in May. Beyond ETF inflows, trading volumes for U.S. spot Ether ETFs climbed steadily, buoyed by renewed conviction among pension funds and endowments that view Ether as a core liquid exposure to smart‐contract ecosystems. In parallel, centralized exchanges rolled out new yield‐bearing products—such as ETH staking services and liquid restaking derivatives attracted by Pectra’s improved validator economics. On the decentralised side, total value locked (TVL) in ETH‐based lending markets rose by nearly 8 per cent, as optimised staking rewards fueled capital rotation back into DeFi. While Ether’s realised volatility stayed elevated relative to Bitcoin, these steady capital inflows and the launch of next‐generation institutional products suggest a maturing market structure that could dampen acute drawdowns. Looking ahead, continued ETF subscriptions combined with evolving staking derivatives may cement Ethereum’s status as a preferred institutional blockchain exposure.