(Kitco News) – Cryptocurrency prices were under pressure in early trading on Monday as traders braced for an important week on the data front, with the U.S. Producer Price Index (PPI) and Consumer Price Index (CPI) reports set to provide the latest update on inflation.
“It feels that any number that falls outside of expectation could be the catalyst for an outsized move, in either direction,” said David Morrison, Senior Market Analyst at Trade Nation. “It is worth considering that US Treasuries remain in demand, suggesting that investors are wary of taking on too much additional exposure to equities. Bonds are also getting support from the prospect of a sharp fall in interest rates. The CME’s FedWatch Tool is forecasting cuts totaling 100 basis points before year-end, with 50 coming at the Fed’s next meeting in mid-September.”
While interest rate cuts are widely expected, the early price action on Monday suggests that traders are content to sit on the sidelines amid escalating tensions between Israel and Iran as they look to avoid the fallout that may result from a flare-up in fighting.
Data provided by TradingView shows that after trading near support at $61,000 during the weekend, Bitcoin (BTC) fell back below $60,000 late on Sunday. Bulls and bears are now battling it out for control of the price action above $59,000.
BTC/USD Chart by TradingView
“Last week was marked by extreme volatility, underscoring the heightened uncertainty not only within the digital assets market but across global financial markets,” said Matteo Greco, Research Analyst at Fineqia International. “This volatility is driven by geopolitical tensions and increasing uncertainty regarding short- and mid-term economic forecasts. Although BTC's weekly price change was only 0.9%, the price fluctuated by as much as 23.6%—a level of volatility not seen since the last week of February.”
“BTC Spot ETFs recorded modest outflows last week, with around $170 million in net outflows, following approximately $80 million in outflows the previous week,” he added. “These modest outflows, despite the significant market downturn, where BTC fell from $68,250 to $58,150 over two weeks (a roughly 15% drop), suggest that the price action was primarily driven by digital asset market participants rather than traditional financial instruments.”
Greco noted that since the end of July, “total open interest in Bitcoin has dropped by about 12%, from $4.6 billion to $4.1 billion. This decline highlights the substantial liquidations that have impacted the digital assets market, causing a snowball effect that drove prices lower and reflected a strong correlation between market activity on centralized and decentralized exchanges and the recent price action.”
“A reduction in leverage, while leading to short-term price declines, is often viewed positively by markets as it reduces the risk of over-leveraging, which could result in a more severe market correction if growing more and reaching non-sustainable levels,” he said.
In an interesting turn of events, while globally listed Bitcoin investment products recorded minimal inflows of $13 million last week, according to data provided by CoinShares, Ethereum (ETH) funds recorded $154.3 million in inflows, helping to make up for the outflows the newly launched spot Ether exchange-traded funds (ETFs) have seen since launch.
“Ethereum has benefited the most from the recent market correction, attracting US$155m in inflows last week,” said James Butterfill, head of research at CoinShares. “This brings its year-to-date inflows to US$862m, the highest since 2021, largely driven by the recent launch of US spot-based ETFs.”
From a geographic perspective, “every region saw inflows last week suggesting unanimous positive sentiment towards the asset class following the recent price correction,” Butterfill said. “Most notable was the US, Switzerland, Brazil and Canada with US$89m, US$20m, US$19m and US$12.6m respectively. The US remains the only country to see net outflows month-to-date totalling US$306m.”
“Trading activity in ETPs was much higher than usual at US$19bn for the week, versus US$14bn weekly average this year so far,” Butterfill noted. “Bitcoin began the week with outflows but saw significant inflows in the final days, bringing total weekly inflows to US$13m. Short Bitcoin ETPs saw their largest outflows since May 2023, totalling US$16m (23% of AuM), reducing AuM for short positions to its lowest level since the start of the year, indicating a substantial investor exit.”
At the time of writing, Bitcoin trades at $60,224, an increase of 0.08% on the 24-hour chart.
