Summary
- U.S. spot Bitcoin ETFs recorded net outflows for the second consecutive day on Friday, ending a week-long inflow trend, as reported by Farside Investors.
- Over a two-day period, the funds lost $465 million, nearly half of the approximately $1 billion gained during the inflow streak, with BlackRock's IBIT leading the outflows.
- Analysts attribute this trend reversal to macroeconomic concerns, including rising tensions between the U.S. and Iran, oil prices exceeding $100, and the possibility of a Federal Reserve interest rate hike.
According to Farside Investors, U.S. spot Bitcoin ETFs have seen net outflows for the second day in a row on Friday, marking the end of a seven-day inflow streak.
On Friday, these funds experienced a loss of $240 million, following a $225 million outflow the previous day, which has now erased nearly half of the nearly $1 billion accumulated during the inflow period. The highest inflow reached $227 million on July 20, which was the peak day of the streak before interest waned. BlackRock's IBIT was primarily responsible for this downturn, contributing just under $415 million to the two-day outflow. Nevertheless, the ETFs concluded the week with a net gain of nearly $34 million, as the outflows only partially offset three robust inflow sessions.
Market Caution
Tim Sun, a Senior Researcher at HashKey, explained to Decrypt that the swift reversal indicates that institutions are making "tactical, phased allocations near the temporary price bottom," which reflects a "lack of a solid foundation" for a sustained upward trend rather than genuine conviction buying. He emphasized the significance of IBIT's substantial role, noting that it serves as the large, liquid fund that institutions typically utilize to increase exposure or hedge positions. Significant outflows from IBIT suggest that institutions are "actively reducing their short-term Bitcoin exposure."
Sun linked this movement to deteriorating macroeconomic conditions, such as heightened U.S.-Iran tensions that have driven up oil and inflation expectations, along with bond markets pricing in a greater likelihood of a Federal Reserve rate hike later this year. He noted that the pullback was not limited to the cryptocurrency market, as U.S. stock funds reported net outflows for a second consecutive week, and bond funds ended their streak of inflows, indicating a broader contraction across asset classes. According to Sun, the data confirms two key points: that Bitcoin's rally "lacks a firm foundation," and that capital "remains on high alert" regarding macroeconomic risks. He warned that if expectations for rate hikes continue to rise, Bitcoin "could face further capital outflows and downward price pressure."
Currently, Bitcoin is trading at $65,300, reflecting a 1.9% increase over the week, according to CoinGecko data. On the prediction market Myriad, which is owned by Decrypt's parent company Dastan, users now estimate a 37% chance that Bitcoin will rise to $84,000, an increase from just 20% at the start of the month.
In a note last week, Grayscale's head of research, Zach Pandl, suggested that Bitcoin's bottom "may already be in" if the Federal Reserve refrains from further rate hikes, rejecting the "four-year cycle" hypothesis that suggests a deeper low could occur in September or October. The Fed's next rate decision is scheduled for July 29, which will serve as a near-term test of that perspective, with the CME FedWatch tool currently indicating a 34% probability of a 25 basis points rate hike.
Anticipating a Recovery
Stephen Wundke, strategy and revenue director at Algoz Technologies, concurred that the trend "reversed last week" due to President Trump's indication of renewed actions against Iran and Houthi attacks near the Red Sea that pushed oil prices back above $100, reigniting inflation and interest rate concerns, prompting investors to return to cash.
However, he expressed a more positive outlook for the future. Wundke noted that many investors view current prices as "near the bottom of the cycle," and there is an overall sense of optimism. With a pause in U.S.-Iran strikes extending to a third day, he expects that if the conflict "fizzles out," oil prices will stabilize around $80, inflation fears will diminish, and ETF inflows—and prices—will begin to rise consistently again. He cautioned that August is typically a "quiet month for crypto," so investors shouldn't expect immediate dramatic movements, but he believes the industry is positioning itself for a rally as the year comes to a close, ideally supported by a negotiated peace in the Middle East.