Bitcoin remains stuck below $80.000 as inflow slows

Bitcoin is failing to establish itself sustainably above $80.000. According to a market analysis by CoinShares, the coin has gained considerable ground over the past few weeks, from the low $60.000 range to a brief peak of $80.100, but Federal Reserve policy is dampening further gains. At the same time, inflows into crypto investment products are visibly declining after two strong weeks.

Bitcoin is available at OKX and Bybit.

In short:

• Global inflows into crypto ETPs fall from $2.9 billion two weeks ago to $1 billion this week.
• Bitcoin is behaving increasingly like gold, driven by concerns over US government finances.
• According to CoinShares, a resolution of the Iran conflict or further declining confidence in US government paper are the two scenarios that could keep the price above $80.000.

Inflows into crypto products decline sharply

Inflows into global crypto ETPs have fallen sharply over the past few weeks. Two weeks ago, $2.9 billion still flowed in, the strongest week of the year. Last week that had already fallen to $2 billion, and this week the tally so far stands at $1 billion.

James Butterfill, head of research at CoinShares, attributes this pattern to interest rate expectations. Shortly after Fed official Kevin Warsh made a statement on Friday that was interpreted as hawkish, emphasising inflation rather than the weakening labour market, roughly $100 million flowed out of the products. Markets subsequently began pricing in a probability of about two-thirds of a rate hike in September.

Fed Governor Christopher Waller subsequently tempered those expectations by pointing to encouraging signs of declining inflation. If August inflation confirms that trend, he favours unchanged policy in September. His remarks pushed down government bond yields and temporarily helped Bitcoin above $80.000.

CoinShares states that investors are not leaving the market, but are reacting to changes in expected interest rates. Notably, shares of blockchain-related companies are showing more sustained demand. Inflows there amount to roughly $27 million this week and more than $100 million over the past month. According to the research firm, this points to a shift within the sector toward infrastructure and tokenisation companies, rather than an outflow from the crypto market as a whole. Earlier this week, Bitcoin ETFs already attracted $731 million on 3 September.

Fed and Iran determine whether Bitcoin breaks through

The recent rise in Bitcoin’s price, according to CoinShares, has been driven by concerns over the sustainability of US government finances. The US Treasury increased its purchases of long-dated government paper, fuelling the so-called debasement trade: investors are moving into hard assets as protection against the erosion of money’s purchasing power. In that climate, Bitcoin is behaving increasingly like gold.

Nevertheless, interest rates remain the main ceiling. The ten-year US Treasury yield stands at around 4.7%, meaning the market is demanding a considerably higher compensation for holding US government paper. Government debt now amounts to approximately 122% of gross domestic product. Attempts by the Treasury to push down long-term yields have so far had little effect.

Butterfill cites two scenarios that could sustainably push the price above $80.000. The first is a resolution of the conflict with Iran, which would push down the oil price and inflation expectations and provide room for a more accommodative Fed policy. The second scenario is further declining confidence in US government paper, increasing demand for alternative assets such as Bitcoin and gold. A complete loss of confidence in US government paper remains a tail risk, but would be extraordinarily favourable for both.

As long as neither occurs, CoinShares expects Bitcoin to keep moving in a sideways range. The two most informative moments are the publication of the August inflation report and the Fed meeting in September. The former determines whether Waller’s disinflation scenario holds; the Fed meeting will clarify whether the internal divisions within the central bank tip toward inflation or employment as the leading criterion. The Bitcoin price previously fell back to $79.000 after a correction on Friday afternoon and currently stands at $79.700, down 1.6% over the past 24 hours.

More details can be found in the full CoinShares market update.