Mainstream market

As the overall market was weak, LUNA buying was not enough to support the UST nesting mechanism triggering a series of sell-offs by major institutions in major currencies, accelerating the overall crypto market decline, plunging to record lows in early May, consolidating in the first month and slightly rebounded at the end of the month. 33% max decline in BTC @ $26.7k, 39% max decline in ETH @ $1.8k.

Tier 1 Trends

The overall number of projects that continued to finance in May did not change much, however, the quality continued to decline, so there were few successful financing cases and not many bids from Tier 1 institutions. The persisted high valuation was also finally reduced in May (20%-40% for seed rounds, private placements mostly delayed), and individual star projects still completed financing at high valuations (e.g., StarkWare @ $8b), mostly for infrastructure. On the contrary, LPs with earnings or spare money at the end of the bull market concentrated their capital into the primary market funds for alpha (e.g., Old Fashion Research, A16Z, IOSG and other institutions have raised or closed financing). Meanwhile, after a large number of Web2 practitioners started to hold high the banner of Web3 last month, Web2 investment institutions have also transformed (laying off staff + forming overseas/web3 teams).

International Trends

U.S. stocks continued their downward trend at the beginning of May in anticipation of the FOMC meeting, but began to rebound in late May after inflation data did not exceed expectations, but have not yet to regain the height of the beginning of the month (Dow Jones max -10% @ 30,635, S&P500 -11.5% @ 3,811, NASDAQ -15% @ 11,492). The Shanghai composite index rallied the most to 3,188 points (+4.65%). Chinese capital controls remain strong.

Event Impact

The “struggle” meeting at the end of April led to a further deterioration in economic expectations, while the “stabilize the economy” meeting at the end of May started to have a slightly positive effect, and in recently days the State Council has made increasingly firm statements. Market panic eased slightly.

Post-market expectations

The previous forecast Q2 late Q3 early rally inflection point came earlier due to the catalytic effect of LUNA at the beginning of the month, however, considering that the rate hike and tapering process is not yet over + economic downward pressure, this rally is not a bull market inflection point. It is expected that after a small period of shock growth, the next downward inflection point will be ushered in.