5 Must-Know Risks Before You Buy Bitcoin in May
3min read Bitcoin’s ascent toward $100,000 in early 2025 has drawn renewed investor interest, but its trajectory in May hinges on navigating a complex web of risks. From regulatory shifts to macroeconomic pressures, the crypto market’s volatility demands careful scrutiny. Below are the five critical risks investors must assess before committing capital.
Ask Aime: Is Bitcoin's $100,000 surge imminent, or are regulatory hurdles holding it back?
1. Regulatory Uncertainty and SEC Policy Shifts
The U.S. Securities and Exchange Commission (SEC) has emerged as a pivotal player in shaping Bitcoin’s regulatory landscape. While the SEC recently dismissed lawsuits against exchanges like coinbase and halted enforcement actions against Binance, its newly formed Crypto Task Force is redefining compliance standards.
The Task Force’s focus on distinguishing securities from non-securities under the Howey test could indirectly affect Bitcoin’s classification. Though Bitcoin is generally treated as a commodity, any regulatory misstep by adjacent markets—such as stablecoins under the proposed GENIUS Act—could spill over. Investors must monitor SEC rulings on meme coins and crypto lending platforms, as these decisions may expose systemic vulnerabilities.
2. Federal Reserve Policy and Inflationary Pressures
The Fed’s stubborn adherence to a 2% inflation target—historically extreme given the Core PCE’s average of 3.24% since 1960—has delayed rate cuts. As of May 2025, traders priced a 63% chance of a 25-basis-point cut by June, but the Fed faces a “lose-lose” dilemma: cutting rates risks reigniting inflation, while inaction could deepen the looming recession.
Bitcoin’s performance is inversely tied to real yields. If the Fed fails to pivot, risk assets like Bitcoin could face prolonged headwinds. Analysts warn that stagflation—a mix of high inflation and rising unemployment—could erode Bitcoin’s appeal as a store of value.
3. Market Volatility and Leverage-Driven Corrections
Despite Bitcoin’s recovery to $95,000 in April, May has seen a pullback to $58,000 amid profit-taking. On-chain metrics reveal mixed signals: whale accumulation (entities holding >10,000 BTC) hit near-maximum scores, yet Bitcoin’s Net Unrealized Profit/Loss (NUPL) index fell to 0.42, signaling widespread holder losses.
The dominance of institutional inflows—$3.3 billion weekly via ETFs like BlackRock’s iShares—adds another layer of risk. A sudden outflow, triggered by macroeconomic shocks or ETF liquidity concerns, could amplify volatility.
4. Geopolitical Risks and Trade Policy Uncertainty
President Trump’s tariffs have exacerbated inflationary pressures, with Q1 GDP growth falling below expectations. A “Trumpcession” now ranks as the base-case scenario, with unemployment and trade imbalances worsening.
Geopolitical tensions, particularly in energy and tech sectors, could disrupt Bitcoin’s narrative as a “global reserve asset.” The U.S. Strategic Bitcoin Reserve, announced in Q1 2025, may offer stability but also politicizes the asset, introducing new regulatory risks.
5. Technical and On-Chain Weakness
Despite bullish fundamentals, Bitcoin’s technical indicators are flashing caution. Its Relative Strength Index (RSI) dipped to 42—near oversold territory—while the 50-day moving average ($60,500) acts as critical resistance.
Ethereum’s resilience (gas fees up 12% to 25 Gwei) contrasts with Bitcoin’s retail hesitancy, as active addresses fell 3.2% to 620,000. A prolonged failure to breach $60,000 could trigger a deeper correction, especially if the Fed’s June meeting delivers a hawkish surprise.
Conclusion: Navigating the Crossroads
Bitcoin’s May outlook is a high-wire act between institutional optimism and systemic risks. While ETF inflows and whale activity suggest long-term bullishness, the Fed’s inflation fixation, regulatory ambiguity, and geopolitical instability pose clear threats.
Key Data Points to Monitor:
- Fed Rate Cut Probability (June 2025): A cut below 50% could trigger a 15–20% Bitcoin selloff.
- SEC Crypto Task Force Updates: A securities ruling impacting stablecoins could spill over to Bitcoin’s ecosystem.
- On-Chain Metrics: A sustained RSI below 50 or a drop in whale accumulation scores would signal bearish momentum.
Investors should consider dollar-cost averaging, hedging via inverse ETFs, or waiting for a Fed pivot before committing significant capital. Bitcoin’s May performance will test whether its narrative as a decentralized hedge holds—or if old risks outweigh new opportunities.
In the words of the market: “Don’t fight the Fed, but don’t ignore the whales.”
This analysis synthesizes regulatory, macroeconomic, and technical data to underscore the critical risks shaping Bitcoin’s May trajectory. Investors must weigh these factors carefully—or risk being swept by the next wave of volatility.
