Bitcoin Price Dives Despite Record ETF Inflows Amid Fed Rate Hints

• Bitcoin price has retreated to $77,286 despite the soaring ETF inflows.
• The ETF inflows have jumped to the highest level in months.
• The Federal Reserve Chair hinted that rates will remain unchanged for a while.

Bitcoin price fell sharply on Aug. 28 after Federal Reserve Chair Kevin Warsh reinforced the central bank’s focus on persistent inflation.

BTC declined from an intraday high near $81,330 to around $77,300 as traders increased bets that the Fed could raise rates again. The selloff came despite continued strength in U.S. spot Bitcoin ETF flows.

Data show that American investors have continued buying ETFs over the past few weeks as stock market volatility has escalated. These funds added over $242 million on Thursday, the ninth consecutive day of inflows.

As a result, they have added $1.13 billion this week, bringing the monthly increase to $3.51 billion, much higher than the $172 million they added last month. This is the biggest monthly increase since September last year when they added over $3.5 billion in assets.

Bitcoin ETF inflows have jumped recently as demand for AI stocks has waned, with popular stocks like SanDisk, Micron, and Western Digital being in a bear market.

The ongoing inflows have also remained at an elevated level as futures open interest continues rising. The daily futures open interest rose to over $55 billion, its highest level since May 18 this year. This increase is a sign that demand in the futures market is still soaring. In Hyperliquid alone, the 24-hour figure rose to over $2.9 billion.

Bitcoin price is slipping as investors start to book profits after the recent rally. Historically, it is common for assets to drop after hitting a crucial resistance level, which, in this case was $80,000.

One reason for this is that the Federal Reserve hinted that it would either hike interest rates or maintain them unchanged this year. In a statement at the Jackson Hole Symposium, Governor Kevin Warsh said that inflation was still at an elevated level.

His statement came a day after the US published the latest Personal Consumption Expenditures (PCE) inflation report. This report showed that the headline and core PCE remained above 3.5% in July this year. Inflation has remained above the 2% in the last five years.

The statement also suggested that the bank may hike rates. Polymarket data shows that the odds that the Fed will hike interest rates later this year soared to 68%, its highest level since August 4. It has soared from this month’s low of 48%.

Bitcoin tends to underperform the market whenever the Fed is hiking interest rates or when it maintains higher rates for longer.

Looking ahead, the next important catalyst to watch will be next week’s non-farm payrolls (NFP) data on Friday next week. This report will provide more insights about the state of the economy and hints on what to expect from the Fed.

The daily chart shows that BTC price peaked at $81,330 on Friday and then pulled back sharply after the Fed Chair statement at the Jackson Hole Symposium. It has formed a bearish engulfing pattern, which is made up of a big bearish candle that fully covers the previous bullish candle.

Another risk is that it peaked at $81,330, which nearly aligned with the highest point in May this year. It is common for assets to drop after hitting a crucial resistance level.

At the same time, the Relative Strength Index (RSI) has moved from the extreme overbought level of 85 to the current 71. Therefore, the coin will likely remain under pressure in the foreseeable future and then stage a strong comeback later this year. If this happens, it may rebound to the psychological level of $85,00.

This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets can experience sharp price movements.

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