Bitcoin experienced a notable decline on Monday, dropping 1.8% to $62,853.4 as renewed hostilities between the United States and Iran prompted investors to shy away from riskier assets like cryptocurrencies. This latest dip places Bitcoin approximately 50% below its all-time high reached in October.
The tensions escalated over the weekend with conflicting reports regarding the Strait of Hormuz. While the US maintained that the vital waterway remained open, Iran claimed significant portions were closed, leading to increased global uncertainty.
In response to the geopolitical turmoil, oil prices surged nearly 5%, raising concerns about inflation driven by energy costs and the subsequent impact on interest rates. Historically, rising interest rates decrease the appeal of non-yielding assets such as Bitcoin, further compounding the cryptocurrency’s challenges.
Analyst Ted Pillows highlighted the ongoing weakness in spot demand as a critical hurdle for Bitcoin, suggesting that without the return of spot buyers, the cryptocurrency is unlikely to reclaim the $65,000 mark it has struggled to surpass.
Recent data indicated that Bitcoin exchange-traded funds (ETFs) had been experiencing a decline in investor interest, with eight consecutive weeks of outflows preceding last week. However, the tide appears to be turning as US-listed spot Bitcoin ETFs recorded $197.4 million in net inflows for the week ending Friday, effectively ending the outflow streak. Most of the inflows were attributed to BlackRock’s iShares Bitcoin Trust ETF, which alone garnered $291.9 million.
Despite this positive development, some outflows from other funds, including Grayscale and Fidelity’s Wise Origin Bitcoin Fund, tempered the overall gains. Monochrome Asset Management’s CEO, Jeff Yew, suggested that these inflows could be indicative of early positioning by institutional investors ahead of anticipated regulatory clarity from the CLARITY Act in the coming months.
Market analysts remain divided on Bitcoin’s near-term outlook. Markus Thielen, CEO of 10x Research, pointed out that ongoing ETF and stablecoin outflows, along with traditional seasonal trends, may continue to present challenges. He observed that Bitcoin generally performs better in the first half of each month but tends to stall later on.
In a broader context, the $197.4 million in inflows last week is modest when compared to the staggering $8.26 billion withdrawn from Bitcoin ETFs since May 11. Meanwhile, Real Vision’s analyst Jamie Coutts suggested that Bitcoin could be entering the latter stages of a bear market, with signs that selling pressure is beginning to ease.
On a similar note, Russell Thompson, Chief Investment Officer at Hilbert Capital, warned that Bitcoin remains in a downcycle with projections suggesting it could hit a low point around October.
Ether ETFs also recorded a positive turnaround, ending their eight-week outflow streak with $84.42 million in net inflows, largely driven by BlackRock and Fidelity funds.
