Bitcoin Faces Profit-Taking and ETF Outflows Amid Market Uncertainty

Bitcoin Struggles Amid Profit-Taking and ETF Outflows

After last week’s impressive rally, bitcoin (BTC) is experiencing a downturn as profit-taking continues to dominate market sentiment. Early Friday, BTC fell below the $59,000 mark, marking a week-long decline. This comes alongside significant outflows from major exchange-traded funds (ETFs), indicating a potential drop in demand.

According to data from CoinGecko, BTC has lost just over 1% in the past 24 hours, pushing its weekly losses to over 3.5%. With just one day remaining in August, BTC appears set to close the month with an 8% decline. This decline is concerning, especially given that overall demand for bitcoin has remained low and has even turned negative in recent weeks, as noted in previous reports.

On Thursday alone, U.S.-listed BTC ETFs experienced a staggering $71 million in net outflows, marking the third consecutive day of such losses, according to SoSoValue data. Among the hardest-hit funds were Fidelity’s FBTC, which saw outflows of $31 million, and Grayscale’s GBTC, losing $22 million. Notably, BlackRock’s IBIT, the world’s largest bitcoin fund by assets under management, recorded outflows of $13 million for only the second time in its history, which took many traders by surprise.

Despite these outflows from professional funds, data from exchanges indicates a rise in demand from U.S. retail investors. On-chain analytics firm CryptoQuant reported that the bitcoin price premium on the Coinbase exchange has surged to its highest level since July. This uptick suggests increased interest from U.S. investors, particularly as bitcoin is once again flowing from exchanges outside the U.S. to Coinbase—a trend historically linked with rising prices.

Looking ahead, traders anticipate a spike in market volatility in the upcoming weeks. BTC has largely remained stagnant over the past week, trading within a narrow range despite favorable rate cut signals and endorsements from notable figures like Republican candidate Donald Trump, which have influenced overall sentiment in the crypto market.

Augustine Fan, head of insights at SOFA, commented in a weekly note to clients, “Crypto had an uneventful week with BTC and ETH fluctuating around +/- 1.5% compared to last week’s levels. ETF inflows remain subdued.” He added, “We expect market dynamics to shift after U.S. Labor Day, particularly with the impending non-farm payroll report, setting the stage for a bustling fall season. Political developments, especially with the recent plans from Harris and Walz to raise taxes aggressively, are likely to gain prominence.”

This sentiment is echoed by traders at Singapore-based QCP Capital, who shared in a recent Telegram broadcast that they foresee continued price fluctuations. They noted, “Risk reversals until October are still skewed towards puts in both BTC and ETH, suggesting that market participants remain cautious about potential downside risks.” As the market gears up for next week’s non-farm payroll report, QCP anticipates ongoing volatility as traders position themselves for anticipated rate cuts by the Federal Reserve.

Indeed, Federal Reserve Chair Jerome Powell has indicated a shift toward lowering borrowing costs next month. Historically, such moves have bolstered bullish sentiment among traders, as easier access to capital often fuels growth in riskier markets.

In conclusion, QCP stated, “With no immediate catalysts on the horizon, we expect prices to continue trading within a defined range as we transition into September.” This cautious outlook underscores the uncertainty that continues to permeate the bitcoin market.