Why did crypto prices get massacred in May?

Rising interest rates and the collapse of Terra's stablecoin saw most digital tokens sell off in May.

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The global crypto market lost 28% in May
  • Investors sold off risk assets as central banks began to hike interest rates
  • The collapse of Terra’s UST stablecoin dragged almost every crypto lower

Crypto investors had little to celebrate in May, with the prices of the vast majority of digital assets finishing the month well into the red.

When all was said and done, the market cap of the combined crypto market fell 28% in May.

What went wrong for crypto prices in May?

Investors were hit on several fronts in the month just past.

The biggest drag on crypto prices was rising interest rates from some of the world's leading central banks.

Market watchers were particularly focused on the US Fed, which boosted the target cash rate by 0.5%. With inflation running hot, the Fed, and here at home the RBA, have flagged a series of additional rate hikes ahead in 2022.

This year has seen digital assets track closely in line with risk assets, like the tech-heavy Nasdaq. While the Nasdaq bounced towards the end of the month, it was down 9% by market close on 24 May.

Most crypto prices were down significantly more, in part due to another big tailwind that surprised investors in May. Namely, the collapse of leading stablecoin – TerraUSD (CRYPTO: UST).

On 12 May, Terra's UST token lost its peg to the US dollar, eventually falling all the way down to a value of just 10 US cents. Terra (CRYPTO: LUNA) – the token intended to help UST maintain its US$1 peg – lost more than 99% of its value.

News of the collapse roiled the crypto community and saw almost every top crypto sell off.

How did some of the top tokens perform in May?

Size was no comfort for crypto investors in May, with the biggest tokens and most popular names falling heavily during the month.

Bitcoin (CRYPTO: BTC), the world's original crypto, which commands 46% of the market's total valuation, dropped 17% in May.

The second-biggest digital token, Ethereum (CRYPTO: ETH), fell 27% over the month.

The popular meme token, Dogecoin (CRYPTO: DOGE), fared even worse, losing 37% in May.

Only a handful of crypto prices managed to finish May even slightly in the green.

Among those, Tron (CRYPTO: TRX) stood out as the clear leader.

Tron, CoinMarketCap tells us, is "a decentralized blockchain-based operating system developed by the Tron Foundation and launched in 2017".

Depending on your time zone, Tron commenced May trading at 6.8 US cents and finished the month at 8.1 US cents, up 19%.

At the current price of 8.3 US cents, Tron ranks as number 13, with a market cap of US$7.7 billion.

Should you invest $1,000 in Nova Minerals Limited right now?

Before you buy Nova Minerals Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Nova Minerals Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares returned to positive territory this Tuesday.

Read more »

Multiple percentage signs in the palm of a man's hand.
Share Market News

ASX 200 lifts on the RBA's latest interest rate call

The ASX 200 is up 0.5% on the heels of the RBA’s interest rate announcement.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Macquarie tips 40% upside for this ASX 200 real estate stock

Let's see what the broker is saying about this stock.

Read more »

Woman sits at her desk working at night, while traffic flows on a busy freeway out the window behind her.
Broker Notes

Transurban shares: Buy, hold, sell? Here's Macquarie's recommendation

Macquarie’s analysts just ran their slide rules over Transurban shares. Here’s what they found.

Read more »

A woman sits at her home computer with baby on her lap, and the winning ticket in her hand.
Consumer Staples & Discretionary Shares

Which 'enduring high-quality business' has become a forgotten ASX 200 stock?

Fundie says this ASX 200 consumer discretionary stock has been flying under investors' radar.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Financial Shares

Want a financial stock outside the big 4 banks? Macquarie tips 15% upside for this small cap financial

For those searching on the edges, this name could be worth a second look according to Macquarie.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Kogan, Monash IVF, OFX, and ResMed shares are falling today

Why are these shares taking a tumble today? Let's find out.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Share Gainers

Why Breville, Clarity, EOS, and TechnologyOne shares are racing higher today

These shares are having a strong session on Tuesday. But why?

Read more »