In an unexpected twist, Bitcoin and the larger cryptocurrency market appear to be hitting a cool patch amidst a heated 2023 rally. For the first time this year, Bitcoin closed the month with losses.

As per data from Messari, Bitcoin, and Ethereum dipped 6% and 1% respectively in May, even though their year-to-date figures remain robustly above 50%.

Galaxy Digital’s CEO, Mike Novogratz, aptly described the situation as the “dog days of summer” arriving ahead of time for the trillion-dollar crypto space. Amidst a backdrop of major tokens trading sideways, Novogratz drew attention to a sluggish climate in the industry.

“Crypto’s seemingly hit a plateau for the moment. There’s consistent interest from retail consumers, observable across all platforms,” Novogratz shared during a CNBC interview, citing WeChat’s recent inclusion of the digital yuan as an example. “Institutional enthusiasm, however, seems to be on a downturn for now.”

In his characteristic bullish stance, Novogratz added: “Crypto’s summer phase has kicked off a tad early. Not exactly my cup of tea, but it is what it is.”

As is typically the case, risk assets such as cryptocurrencies are sensitive to changes in monetary policy. Central banks worldwide are maintaining a firm stance in their policies, potentially contributing to the current market dynamics.

Since March 2022, the US Federal Reserve has responded to high inflation rates with ten consecutive interest rate hikes, with hints of more to come from key policymakers. Wall Street is adjusting its predictions, now expecting more increases after initially anticipating a lull.

Parallel to the Federal Reserve’s actions, the European Central Bank has also been tightening its monetary policy, with clear signals that it’s not quite done raising rates.

This chilling effect on the cryptocurrency market serves as a reminder to investors of the volatile nature of digital assets and the significant impact of global monetary policies on these digital currencies.