Bitcoin Drops to 21-Month Low as Hawkish Fed, ETF Outflows Weigh on Sentiment

Bitcoin fell to its lowest level in 21 months as fears of further Federal Reserve tightening, continued outflows from spot exchange-traded funds and uncertainty surrounding Strategy undermined investor sentiment.

Bloomberg reported on July 30 that Bitcoin dropped as much as $57,742 intraday, its lowest level since September last year.

Bloomberg said the Fed’s hawkish stance is weighing on risk appetite. Recent remarks from Fed officials have raised the prospect of additional interest-rate increases, eroding Bitcoin’s appeal.

“Bitcoin is facing headwinds from a shift in the Fed’s rate outlook and a stronger dollar,” Tony Sycamore, an analyst at IG Australia, said. He added that downside pressure could intensify if US nonfarm payrolls data due this week reinforces the Fed’s hawkish stance.

Funds have continued to flow out of US spot Bitcoin ETFs. More than $4 billion was pulled from US-listed Bitcoin ETFs in June, marking the largest monthly net outflow since the products launched.

Concerns over Strategy have also added pressure to the market. Investors initially viewed the company’s recent plans for share buybacks and larger cash holdings positively. But attention later turned to the greater flexibility it now has to sell its Bitcoin holdings, raising questions about whether the largest institutional buyer will keep purchasing steadily.

Bitcoin has fallen more than 50% from its all-time high of $126,000 reached in October last year and has dropped below its 200-week moving average, a key long-term trend indicator. Market watchers say the break below that level could signal a prolonged bear market.

Caution has also grown after Fed officials, including Fed Chair Kevin Warsh, signaled the possibility of further tightening to curb inflation. Beth Hammack, president of the Federal Reserve Bank of Cleveland, also recently said rate increases may be needed to return inflation to the Fed’s 2% target.