Bitcoin Price Drops as ETF and Interest Rate Risks Jump: What Next?

Bitcoin price retreated for the fourth consecutive day as traders reflected on the ongoing risks in the market. BTC fell to $63,963, down modestly from this week’s high of $67,000. So, is this the start of a prolonged bear market or a temporary pause?

Bitcoin ETF Outflows Have Resumed

BTC has slipped over the past few days as data show American investors have resumed their selling spree, a sign they expect the price to remain under pressure for a while.

Data compiled by SoSoValue shows that spot Bitcoin ETFs shed over $240 million in assets on Friday. A day earlier, these funds saw redemptions totaling $225 million. These outflows came as the funds recorded eight consecutive days of inflows.

As a result, the cumulative inflows this month stands at over $233 million. While this is encouraging, it remains much lower than the $6.8 billion outflows experienced in May and June.

Friday’s outflows were led by BlackRock, which lost over $212 million in assets, followed by Fidelity’s FBTC, which shed $28 million. Other ETFs did not have any activity on Friday.

Geopolitical Risks Push Investors to Bet on Interest Rate Hikes

The ongoing Bitcoin ETF outflows have coincided with the start of the earnings season and the escalation of the US-Iran war. Top American companies have already published their earnings, with investors receiving them negatively.

For example, Tesla stock dived after the company recorded a negative free cash flow because of the ongoing AI spending. Intel’s stock initially soared after its results showed strong growth, but then pared these gains. It ended the day 8% lower. Google shares also dropped after boosting its annual capital spending to $205 billion.

Meanwhile, the ongoing US-Iran war has pushed investors to predict that the Federal Reserve will hike interest rates to combat inflation. Gasoline prices have jumped to $4.111 as Brent and West Texas Intermediate (WTI) have soared to $100 and $94, respectively.

Data shows that the odds of a Fed rate hike happening on Wednesday jumped to 38% from 13%. On Polymarket, the possibility of a rate hike happening this year has jumped to over 70%.

The assumption is that Trump’s war will lead to a resurgence in inflation, which will then push the Fed to intervene. Most recently, Christopher Waller, one of the bank’s top doves, said that he would support hiking interest rates if core inflation rose.

Another risk facing Bitcoin is that many large holders, especially mining companies, will start selling their coins.  MARA Holdings holds 36,303 coins, while Riot Platforms, CleanSpark, and Hut 8 hold thousands of coins.

These companies are now pivoting from Bitcoin mining to artificial intelligence, a capital-intensive business. MARA has already sold some of its coins, as it held over 53k at its peak.

Bitcoin Price Technical Analysis

Technicals also explain why the BTC price has plunged in the past few days. This retreat happened after the coin formed a double-top pattern at $67,018, its highest swing in June and July this year. This pattern typically signals that investors are afraid to open trades above that level.

Notably, the retreat happened after the coin approached the 100-day Exponential Moving Average (EMA). That was a sign that it faced substantial resistance in this period.

The Relative Strength Index (RSI) and the MACD indicators have all reversed and pointed downwards. Therefore, the most likely scenario is that the coin continues to fall as bears aim for the key support level of $60,000.

On the other hand, a move above the double-top level of $67,018 will invalidate the bearish outlook and point to more upside.