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The first trading week of August turned out to be unusual for Bitcoin, wrote market maker Wintermute in its crypto market review. Although institutional investors actively bought Bitcoin through exchange-traded funds (ETFs), and the price of Bitcoin rose by a couple of percent, experts urged not to jump to conclusions. The market maker believes that one successful week does not indicate a structural reversal, and a bullish trend requires stable capital inflows over several weeks.
During the week ending August 9th, Bitcoin ETFs recorded record capital inflows of $853.5 million since April. And although Bitcoin rose above $65k by the end of the week, showing growth of over 2%, its dynamics turned out to be weaker than those of assets in the global market. Bitcoin was not the growth leader this time, although it usually outperforms traditional assets during rallies. For comparison: the S&P 500 index of major US companies jumped by 3.5%, and gold soared by more than 7%.
The positive sentiment was accompanied by the fact that, against the backdrop of weak US labor market data, investors concluded that the Federal Reserve (Fed) is now more likely to lower interest rates.
The main reason for the weakness of Bitcoin's exchange rate relative to other assets, according to Wintermute, is that the market is waiting for confirmation of the trend: "ETF inflows have returned, but we need to see them continue a bit longer before the trend becomes truly encouraging."
Nevertheless, experts note an important shift: institutional investors are gradually returning to buying. Although caution prevails in the market maker's rhetoric: US macroeconomic data "still remain weak." And if economic indicators worsen (e.g., an acceleration in inflation growth) or the conflict in the Middle East escalates, the market could sharply reverse.
Observations about positive shifts in the Bitcoin market are voiced not only by Wintermute but also by other key players in the crypto market. For example, the largest asset manager BlackRock noted that investors have become more positive towards Bitcoin. And the company's head called the crypto market "stable" largely due to a decrease in the level of leverage among its participants.
What is Needed for Bitcoin Growth
As factors confirming a bullish trend, analysts "want to see" stable demand for Bitcoin from ETFs and companies engaged in accumulating cryptocurrency as a reserve. And they defined the duration of stable capital inflows as "until the end of summer." Especially considering that the growth occurred "based on just one indicator" of the US labor market, wrote the market maker.
For several months in a row, the market maker's analysts have pointed out in their weekly reports that the dynamics of exchange rates in the crypto market depend on liquidity flows from three components: stablecoins, exchange-traded funds, and companies that accumulate cryptocurrencies in reserve (digital asset treasuries, DAT).
And while some revival is observed in two of these liquidity sources, according to Wintermute's data, the stablecoin market has been stagnating since late spring. From May, when the market capitalization of stable coins exceeded a record $315 billion, by August 11th the figure fell below $300 billion.
Approximately 50% of the $15 billion decrease in stablecoin capitalization was accounted for by US-regulated tokens like USDC from Circle, USD1 from World Liberty Financial, and PYUSD from PayPal. The capital outflow from these dollar-based tokens coincided with active discussion of the CLARITY Act cryptocurrency bill in the US, which was postponed until autumn.
"Quiet" Institutionalization
In addition to macroeconomics and capital inflows, Wintermute noted positive observations regarding institutionalization in the crypto market, which they called "quiet." As an example, they highlighted asset tokenization and bank participation in this area.
"Banks are not switching to using crypto assets—they are adopting their infrastructure to protect their own assets," wrote the experts: some banks, including Wells Fargo, JPMorgan, and Citi, are transferring settlement mechanisms for their assets to the blockchain. But instead of using stablecoins, they tokenize their own clients' deposits.
While crypto companies are developing infrastructure for stablecoins, traditional banks in the US, fearing client outflow to cryptocurrencies, are demanding limitations on the functionality of stable tokens. And the banking lobby is trying to prevent the passage of the important CLARITY Act regulation bill for the crypto market through Congress.
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