The price of Bitcoin slipped by over 4% Thursday morning alongside the wider crypto market, amid a broader trend of risk-off sentiment among investors.
Per data from CoinGecko, Bitcoin dropped by 4% to around $58,500, while Ethereum shed 3.8% to around $2,630. The total market capitalization of all cryptocurrencies fell in lockstep, contracting by 4.4% to $2.1 trillion.
The market downturn followed Wednesday’s Consumer Price Index (CPI) report from the Labor Department, which showed a 0.2% increase in prices for July, bringing the annual inflation rate to 2.9%.
These figures, which were in line with economists’ expectations, indicate a stabilization in inflationary pressures.
The core CPI, which excludes volatile food and energy prices, also met predictions with a 0.2% monthly rise and a 3.2% annual rate.
“What we needed from the CPI was a boring number, and that’s exactly what we got,” Matt Hougan, CIO of Bitwise Invest, told Decrypt.
He added that, “We needed something that wouldn’t derail the Fed from cutting rates in September or shake up the conversations at the upcoming Jackson Hole summit. And that’s what this report was: A boring, beautiful yawner.”
However, while the CPI data may have cooled initial enthusiasm, market analysts are divided on the long-term implications for cryptocurrencies, with a recent report predicting that Bitcoin is unlikely to see a significant breakout until the last quarter of the year.
Bitcoin’s negative price action also comes in the wake of the U.S. government’s transfer of almost $600 million in seized BTC from the Silk Road dark web marketplace to Coinbase.
Such transfers typically presage a sale of the seized Bitcoin, which can spark or exacerbate price movements for the cryptocurrency as investors speculate on the likely outcome.
Bitcoin ETFs see outflows
The downturn in the broader crypto market accompanies outflows from U.S. Bitcoin spot ETFs.
On August 14, U.S. spot Bitcoin ETFs recorded a total net outflow of $81.4 million, ending a two-day streak of inflows, per data from Farside Investors.
The Grayscale Bitcoin Trust (GBTC) continued its streak of outflows, shedding $56.9 million, with Bitwise’s BITB and Ark Invest’s ARKB also seeing outflows.
U.S. spot Ethereum ETFs fared better, with a total net inflow of $10.8 million, though Grayscale’s Ethereum Trust (ETHE) continued its near-unbroken streak of outflows, shedding $16.9 million.
On-chain analytics firm CryptoQuant has observed a decoupling between the price of Bitcoin and the holdings of the German investment fund ETC Group Physical Bitcoin (BTCE).
Historically, the two have been closely correlated, with increases in BTCE reserves often preceding Bitcoin price movements.
However, recent data suggests a shift in this pattern, the firm noted. “The continued reduction in BTCE reserves has not translated into significant changes in Bitcoin price as expected,” it noted, adding that the discrepancy, “may indicate shifts in market dynamics or other influences that warrant a deeper analysis.”
Despite the recent price drop, Sharat Chandra, Founder of EmpowerEdge Ventures, maintains a cautious optimism. Speaking with Decrypt, Chandra warned that price volatility is set to continue as market participants speculate on future interest rate changes by the U.S. Federal Reserve.
He pointed to bullish technical indicators, with the RSI indicator on the daily chart holding above 50, key support levels at $58,800, $57,000 and $59,000 and resistance likely to emerge close to $60,250.
Chandra added that markets are anticipating a 50 bps rate cut in September, which could prompt a rebound in crypto prices.
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