Bitcoin Drops Despite Nine-Day ETF Inflow Streak

Bitcoin price fell sharply on Aug. 28 after Federal Reserve Chair Kevin Warsh reinforced the central bank's focus on persistent inflation. BTC declined from an intraday high near $81,330 to around $77,300 as traders increased bets that the Fed could raise rates again. The selloff came despite continued strength in U.S. spot Bitcoin ETF flows, with the price retreating to $77,286 as inflows climbed to their highest level in months. The divergence is notable because those ETFs, approved by U.S. regulators in January 2024, have become one of the main channels through which institutional money accesses Bitcoin exposure, meaning traditional-finance demand and spot price are increasingly decoupling in the short term.

Data show that American investors have continued buying ETFs over the past few weeks as stock market volatility has escalated. These funds added over $242 million on Thursday, marking the ninth consecutive day of inflows.

As a result, they have added $1.13 billion this week, bringing the monthly increase to $3.51 billion — much higher than the $172 million added last month. This is the biggest monthly increase since September last year, when the funds added over $3.5 billion in assets.

Bitcoin ETF inflows have jumped recently as demand for AI stocks has waned, with popular stocks like SanDisk, Micron, and Western Digital in a bear market. That rotation suggests some investors view Bitcoin as an alternative risk asset when momentum in major equity themes fades.

Inflows have also remained elevated as futures open interest continues rising. Daily futures open interest rose to over $55 billion, its highest level since May 18 this year — a sign that demand in the futures market is still soaring. On Hyperliquid alone, the 24-hour figure rose to over $2.9 billion.

Federal Reserve Hints at Higher Rates

Bitcoin is slipping as investors begin to book profits after the recent rally. Historically, it is common for assets to drop after hitting a crucial resistance level, which in this case was $80,000.

A key reason is that the Federal Reserve hinted it would either hike interest rates or keep them unchanged this year. Higher rates generally raise borrowing costs and make yield-bearing assets more attractive relative to non-yielding risk assets like Bitcoin, which is why rate expectations have repeatedly acted as a macro headwind for crypto markets. In a statement at the Jackson Hole Symposium, Governor Kevin Warsh said inflation was still at an elevated level. His remarks came a day after the U.S. published its latest Personal Consumption Expenditures (PCE) inflation report, which showed that both headline and core PCE remained above 3.5% in July. Inflation has remained above the Fed's 2% target for the last five years.

The statement also suggested the bank may hike rates. Polymarket data shows that the odds the Fed will raise interest rates later this year soared to 68%, the highest level since August 4, up from this month's low of 48%.

Bitcoin tends to underperform the market whenever the Fed is hiking interest rates or holding them higher for longer.

Looking ahead, the next important catalyst will be next week's non-farm payrolls (NFP) data, due Friday. The report will provide further insight into the state of the economy and hints on what to expect from the Fed. Beyond the payrolls print, traders will also be watching whether ETF inflows persist in the face of hawkish Fed expectations, since a sustained slowdown in flows would remove one of the key supports that has held up Bitcoin demand in recent weeks.

Bitcoin Price Technical Analysis

The daily chart shows that BTC peaked at $81,330 on Friday and then pulled back sharply after the Fed Chair's statement at the Jackson Hole Symposium. It has formed a bearish engulfing pattern, consisting of a large bearish candle that fully covers the previous bullish candle.

Another risk is that the peak at $81,330 nearly aligned with the highest point in May this year, and it is common for assets to drop after hitting a crucial resistance level.

Meanwhile, the Relative Strength Index (RSI) has fallen from the extreme overbought level of 85 to 71. Therefore, the coin will likely remain under pressure in the foreseeable future before staging a strong comeback later this year. If that happens, it may rebound toward the psychological level of $85,000.

This article is for informational purposes only and does not constitute financial advice. Cryptocurrency markets can experience sharp price movements.