Hassan Maishera
TL;DR
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Bitcoin fell more than 1% after making four unsuccessful attempts to hold above $65,000.
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Wednesday’s US inflation report could determine whether BTC breaks toward $70,000 or extends its decline.
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Strategy’s reported Bitcoin selling and potential $5 billion liquidation authorization are weighing on sentiment.
Bitcoin (BTC) slipped below $64,000 on Wednesday, declining by 1% as investors prepared for Wednesday’s US Consumer Price Index (CPI) report.
The leading cryptocurrency reached a Tuesday high slightly above $64,400 before losing momentum.
Bitcoin’s retreat followed four failed attempts to establish support above $65,000, leaving the cryptocurrency confined to its recent trading range.
Last week’s unexpected contraction in US payrolls reduced the probability of a September interest-rate hike to around 44%, down from roughly 80% in late July.
According to Nexo Dispatch analyst Iliya Kalchev, the upcoming CPI report represents the first significant inflation test since that repricing.
Failed Breakout Could Mask Bullish Pressure
Although Bitcoin has struggled to overcome $65,000, analysts say the nature of the rejection could be more important than the failure itself.
“What stands out is not the failure itself but the character of it,” Kalchev said.
The lack of aggressive selling around $65,000 suggests traders may be building short positions above the resistance level rather than long-term holders taking profits. If Bitcoin decisively breaks above the barrier, short liquidations could accelerate the move, potentially opening the path toward $70,000.
CF Benchmarks research head Gabe Selby identified a similar pattern in the options market. The CME CF Bitcoin Volatility Index fell to 35.56 on August 4, marking a multiyear low, even as US Treasury volatility remained well above its January bottom.
“Bitcoin upside optionality looks cheap because the market is pricing too much downside fear and too little upside convexity,” Selby said.
Miners and corporate treasuries employing systematic covered-call strategies have created a steady supply of call options. Meanwhile, investors continue to pay higher premiums for downside protection, leaving bullish exposure comparatively inexpensive.
Strategy Selling Weighs on Bitcoin
The market still faces considerable selling pressure from corporate holders. Bitfinex analysts highlighted spot Bitcoin exchange-traded funds and corporate treasury accumulation as two of the most important sources of demand.
However, treasury activity has recently shifted from supporting the price to restricting its recovery.
The analysts identified Strategy’s potential $5 billion liquidation authorization as a significant drag on sentiment. Miner selling, by comparison, has become less influential over the short term.
XS.com business development head Simon-Peter Massabni connected part of the recent whale activity to Strategy selling nearly 1,700 BTC last week.
Continued selling from the company could leave Bitcoin’s recovery more vulnerable to unexpected inflation data, interest-rate expectations and rising energy prices.
US Inflation Data Could Determine Bitcoin’s Direction
Economists expect headline US inflation to ease to 3.4% year over year, while core inflation is forecast to decline to 2.5%.
A softer-than-expected reading could reinforce the disinflation narrative created by last week’s disappointing employment report. That outcome would likely weaken expectations for further monetary tightening and support risk assets such as Bitcoin.
A hotter reading could trigger the opposite reaction, reviving interest-rate concerns and pressuring cryptocurrency prices.
Bitfinex analysts cautioned that expectations for the Federal Reserve to leave rates unchanged in September should not be interpreted as a shift toward monetary easing.
“The hike is being priced out, but easing is not being priced in,” the analysts said.
Three Federal Open Market Committee members reportedly supported a rate increase in July. Investors will therefore monitor the Jackson Hole symposium, scheduled for August 27 to 29, for additional guidance from Fed Chair Kevin Warsh.
ETF Flows Send Mixed Signals
Bitcoin investment flows also present a mixed picture. US-listed spot Bitcoin ETFs attracted more than $850 million across five trading sessions last week, marking their strongest weekly inflow since mid-April. However, the products began this week with $144 million in net outflows, with only a slight inflow of $5 million recorded on Tuesday.
Wincent senior director Paul Howard said steady ETF demand has been offset by over-the-counter selling from miners and Strategy. This has kept Bitcoin trading largely between $64,000 and $67,000 despite global cryptocurrency volumes falling to their lowest level in three years.
CoinShares research head James Butterfill expects Bitcoin to finish the year above its current level. He suggested the lows recorded between March and June may have represented the bottom of the cycle.
Butterfill identified four factors supporting the bullish outlook: attractive valuations, cleaner market positioning following the correction, renewed ETF inflows and the possibility of a less restrictive Federal Reserve.
Bitcoin could benefit if the Fed avoids additional rate hikes, as lower real yields typically improve demand for scarce and growth-sensitive assets.
However, macroeconomic uncertainty remains elevated. Oil is approaching $90 per barrel as negotiations over reopening the Strait of Hormuz stall, while gold is trading near a ten-week high above $4,400. Equities, meanwhile, remain close to record levels.
Crypto sentiment indicators have stayed in fear territory since mid-July. Seasonal trends present another risk, with September historically producing an average Bitcoin decline of approximately 4% since 2013.
