In brief
- Spot Bitcoin ETFs have raked in $1.16 billion over the past seven days, with weekly inflows now at $2.52 billion.
- The Fed's policy decision today could extend or unwind the streak, experts warn.
- Bitcoin up 11% since Iran attack, diverging from gold and S&P 500 declines.
The broader crypto market’s relief rally and sustained Bitcoin ETF inflows face a key test ahead of Wednesday's FOMC meeting.
The seven-day inflow streak has seen U.S. spot Bitcoin ETFs rake in $1.16 billion, with last Tuesday’s $250.92 million marking the largest single-day inflow, according to SoSoValue. The uptick in investor confidence is also reflected in weekly flows, which have recorded a four-week inflow streak totaling $2.52 billion.
The bullish ETF flows and Bitcoin’s relief rally are largely unaffected by escalating tensions in the Middle East and rising oil prices.
Bitcoin is up some 14% from its low as the U.S. and Israel attacked Iran, while gold and the S&P 500 index are down 6.60% and 0.17%, respectively.
The divergence reflects a “classic seller exhaustion” phase followed by institutional re-engagement, Rachel Lin, CEO of decentralized crypto exchange SynFutures, told Decrypt. “Once forced selling subsides, even modest inflows can have an outsized impact on price and flows.”
The ETF inflows are a double-edged sword, according to Lin. While they make Bitcoin’s recovery to $75,000 more durable, they also make it sensitive to macroeconomic catalysts, she said. “Without a clear shift in liquidity conditions or policy expectations, we expect inflows to be episodic rather than a sustained one-way trend.”
Experts previously expressed similar concerns, noting that the bullish ETF streak and the recovery rally could come undone if inflation remains sticky and the Federal Reserve decides to keep rates higher for longer.
The true test of the crypto market’s bullish outlook will occur later today during the policy meeting.
“Crypto markets will likely trade cautiously with relatively tight ranges,” Gracy Chen, CEO of crypto exchange Bitget, told Decrypt. “Any dovish tone from the Federal Reserve could support risk assets, including Bitcoin, while a hawkish stance may trigger short-term volatility.”
Traders have assigned a 98.9% chance that the two-day Federal Open Market Committee policy meeting will keep interest rates steady at 3.50% to 3.75%, according to data from CME’s FedWatch tool. On Myriad, a prediction market owned by Decrypt’s parent company Dastan, users put just a 11% chance on the Fed cutting rates by more than 25bps before July.
Bitcoin is down 1.9% and is trading at around $72,400, retreating after Tuesday’s $75,600 retest, according to CoinGecko data. Myriad users remain cautiously optimistic heading into the FOMC meeting, assigning a 56% chance Bitcoin will rally to $84,000 next rather than drop to $55,000.