Bitcoin’s August rally is facing a tougher test as fresh ETF demand meets growing expectations for tighter U.S. monetary policy. The cryptocurrency is holding above $77,100, but its next move may hinge on whether fresh liquidity can offset rising rate risks, according to Bitfinex Alpha.

This tension was evident in Bitcoin’s recent price action. Bitcoin closed above $80,000 on August 27 for the first time since May, ending at $80,256 after briefly reaching $81,500. It later fell to $76,857 after Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks pushed markets to reassess the outlook for U.S. rates.

Bitcoin Holds Up Despite Rate Fears

The pullback came as markets raised the implied probability of a September rate increase from the mid-30% range to about 60%. Warsh also stressed the Federal Reserve’s 2% inflation target and suggested that monetary policy may not yet be restrictive enough.

Despite the shift in rate expectations, Bitcoin showed some resilience. It closed Friday only about 3% lower and remained above previous range highs through the weekend. Bitfinex identified $77,100 as an important volume-node support level after it helped define the cryptocurrency’s August breakout.

Continued ETF demand may have helped support that resilience. U.S. spot Bitcoin ETFs recorded $924.5 million in net inflows last week despite $202 million leaving the products on Friday. The funds had attracted $3.04 billion during the previous nine sessions, showing continued demand despite shifting expectations around U.S. monetary policy.

Beyond ETFs, stablecoin liquidity also remains relevant to the broader crypto market because it can provide capital for digital assets. However, the Bitfinex report points more directly to ETF demand as a key driver of Bitcoin’s current liquidity conditions.

Market Positioning Remains Stable

Bitcoin’s derivatives market has remained relatively controlled during the rally, according to the report. Perpetual futures open interest reached $55.6 billion, about 20% above the start of August, while funding rates and futures basis remained contained.

Meanwhile, on-chain data points to a shift in Bitcoin ownership. Wallets holding 1,000 to 10,000 BTC have reduced their balances by about 50,500 BTC since late June, while exchange and ETF custodial wallets have added roughly 59,100 BTC.

Source: CryptoPotato