This is the May 2022 monthly market insights report by Bitcoin.com Exchange. In this and subsequent reports, expect to find a summary of crypto market performance, a macro recap, market structure analysis, and more.

Crypto Market Performance

May got off to a rough start as the Federal Reserve confirmed a hawkish bias on the back of lingering inflation. Markets reacted by going risk-off.

The collapse of LUNA and UST added fuel to the fire, with the result that crypto markets saw historically large drawdowns.

BTC reached a low of $25.4k USD, which is 60% off its all-time high of $65k. ETH saw a comparable drawdown.

Other large-cap coins fared even worse, with AVAX and SOL being down over 75% and 80% respectively from their all-time highs.

During the first week of the month, gaming (play-to-earn) saw the worst performance across crypto sectors, followed by top assets (large caps) with losses of 9.6%, and Web3, which was down 8.9%.

Macro Recap: Quantitative Tightening (QT) Is Here to Stay

As expected by the market, on May 3rd the Federal Reserve announced that it had voted for a rate hike of 50 basis points to the funds rate. This announcement was on the back of “robust” job gains and a decrease in unemployment, which has led to increases in inflation. There was also the reduction of the balance sheet, starting from $47B per month to up to $95B per month after the first three months. According to the Federal Reserve’s later statements, System Open Market Account (SOMA) will reduce its holdings of U.S. agency debt and U.S. agency mortgage-backed securities (MBS).

The narrative was focused on uncertainties regarding the macro environment, as Russia’s invasion of Ukraine intensifies and supply-chain issues in China contribute to…