Bitcoin's recent price increase may lack the necessary buying support for a sustainable breakout, as indicated by the latest report from Bitfinex. On July 14, Bitcoin closed at $65,086, marking a 4.4% rise and its highest closing price since June 22. This rally was primarily triggered by softer US inflation data, which altered expectations regarding interest rates, rather than consistent demand for Bitcoin itself.
According to Bitfinex, the gains seen in Bitcoin's price are described as 'borrowed strength' due to insufficient spot buying, a negative Coinbase premium, and fluctuating inflows into US spot Bitcoin exchange-traded funds (ETFs). The report stated that the June Consumer Price Index (CPI) had decreased by 0.4% compared to the previous month, with annual inflation slowing to 3.5% from 4.2%. Core inflation was reported at 2.6%, falling short of market expectations.
The decline in inflation figures has lessened fears regarding imminent interest rate hikes, with expectations for a July increase dropping from 42% to approximately 12.3%. Consequently, Bitcoin's ascent toward $65,000 was facilitated by decreasing Treasury yields and a weakened US dollar following the inflation release. However, prior to the CPI report, Bitcoin exhibited minimal asset-specific demand. This lack of interest was evident in the ETF outflows and consistent corporate holdings at Strategy.
On July 13, US spot Bitcoin ETFs experienced net outflows of $424.7 million, countering previous gains after a week of positive inflows. The following day, however, the funds saw a rebound with net inflows of $181.1 million, driven mainly by BlackRock's IBIT, which contributed $138.9 million. Bitfinex emphasizes that future ETF flows will reveal whether institutional demand can persist beyond the immediate market reactions to economic data.
Strategy reported no changes in its Bitcoin holdings during this period, maintaining its position at 843,775 BTC while raising $466.7 million.
This material is for informational purposes only and should not be considered financial advice.
