Crypto: Signals of a Bounce Are Forming

Spot bitcoin ETFs are in the middle of their longest outflow run on record: roughly $8B has left the category over eight straight weeks. For allocators, that is the headline risk signal right now, more than any single catalyst. There are early reports of inflows returning over the past three sessions, but that figure is not yet confirmed and shouldn’t be treated as a turn until it is. The macro backdrop explains a good part of the outflow pressure. Minutes from the Fed’s June 16-17 meeting showed a committee that held rates at 3.50%-3.75% unanimously and, notably, dropped its easing language rather than adding to it. Core PCE running at 3.3% in April and tracking toward 3.4% in May gave the committee cover to stay firm, even as unemployment eased slightly to 4.2% in June from 4.3% in May. Fed Chair Kevin Warsh has offered no public signal of his own, so the minutes remain the best read available: a September move, in either direction, is still on the table. Add renewed friction in the Middle East, where the Iran ceasefire looks shakier than it did a few weeks ago, and you get a bitcoin market trading defensively against both a firmer rate hurdle and geopolitical noise. Positioning around real rates and dollar strength continues to explain most of the near-term price action. One overhang that looks smaller than advertised: Strategy’s (MSTR) roughly 4%-of-supply bitcoin position. The market’s reaction to Strategy news has become far more muted. A 32 BTC sale in early June triggered a 6% drop in MSTR and a 2% dip in bitcoin, feeding into a broader move down toward $71,500. A much larger 3,588 BTC sale in early July barely registered, with bitcoin instead climbing back to roughly $63,800 afterward. The read: the market has already absorbed the idea that Strategy will sell periodically, so each new disclosure carries less shock value. Regulatory tailwinds ...