In May, Bitcoin (BTC) recorded its first monthly loss since December 2022 with a negative 6.98%. However, this consolidation was obviously not driven by a change in fundamentals or the broader macroeconomic environment. The crypto market was looking for direction and liquidity at this stage before the US Federal Reserve announced a pause in the rate hike cycle in June.
Many indicators, such as the futures market and venture capital investment, point to bullish underlying sentiment. However, while traditional markets and tech stocks were able to continue to rise in May, the cryptocurrency market remained subdued and took some time to recover.
For those interested in gaining a deeper understanding of the various sectors of the crypto space and their fundamental trends, Cointelegraph Research publishes a monthly Investors Insights Report that dives into venture capital, derivatives, decentralized finance (DeFi)regulation and much more.
Mining stocks rise as VC activity shows signs of life
Blue-chip crypto stocks also had a good month, returning 7% MoM. Mining operations and other established companies continued to benefit from the earlier phase of market recovery in March. The mining values returned to register the most notable gains. Following the TeraWulf valuation explosion, Bit Digital followed suit, with its shares rising a staggering 77% after it was announced. mining operations in Iceland.
Many overleveraged mining companies had taken a hit throughout the bear market due to tightening credit conditions and declining BTC prices, now giving competitors the opportunity to rapidly raise assessments. With most now expecting Bitcoin to have already bottomed out for the current cycle, new mining facilities with low electricity prices and newer hardware seem less risky to investors than other sectors of the cryptocurrency market.
Meanwhile, according to Cointelegraph Research VC Database, venture capital investment topped $1 billion for the first time since September 2022 last month. It increased 34% from April, and 81 deals were registered. This is the third straight uptick in VC investment, but it’s unclear whether this means activity will pick up sustainably from bear market levels. In a broader context, inflows are still below a quarter of bull market levels.
BTC Sees Strongest Bear Market Network Activity
Historically, there have been many ways to write data to the Bitcoin blockchain. For a long time, the most popular options were the OP_Return scripts, which formed the backbone of the Omni and Counterparty non-fungible tokens (NFTs). However, thanks to a loophole introduced through the Taproot scripting language, the recently publicized Ordinals protocol allows much larger entries: theoretically up to 4MB.
Following the addition of so-called fungible BRC-20 tokens to the Ordinals protocol, the Bitcoin network experienced its first significant fee spike since 2021. This was positive for the miners, who benefited from the spikes in revenue. The ratio of fee revenue to total mining revenue briefly reached its second-highest level ever at 43% on May 8. In the weeks that followed, it dropped to around 5%, a percentage that is still significantly higher than at the beginning of the year.
It remains to be seen if the recently added function for migrate Ethereum ERC-721 tokens to the Bitcoin blockchain may reignite the hype, or whether fee income will once again be insignificant in the broader context of the mining economy. The mining section of the Cointelegraph Research Monthly Trends report provides a monthly summary of quantitative mining metrics and will closely monitor these developments.
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