Bitcoin markets started the week relatively quietly as traders awaited the much-anticipated CPI reading scheduled for Wednesday morning. On Tuesday, bitcoin experienced a small setback, declining by 2.59% after higher-than-expected PPI (Producer Price Index) figures caused initial fear that CPI figures would also come in higher. This would have reduced the likelihood of rate cuts later this year. However, these fears were quelled when month-over-month inflation came in at 0.3%, below the consensus estimate of 0.4%.

This cooler-than-expected CPI print was enough to send bitcoin rallying almost 8% on the day, immediately after the release at 8:30 AM EST. Major indices like the Nasdaq and S&P 500 also benefited from this economic release, skyrocketing to new all-time highs, which is worth mentioning due to the correlation between the tech sector and bitcoin’s performance.

On the week, bitcoin achieved a double-digit gain of 10.53%, marking the largest winning week since late March and breaking a streak of six consecutive losing weeks dating back to the first week of April.

Liquidation Heatmap Overview

With the move from the lower $60,000s to slightly over $67,000, a significant number of leveraged short positions at the $67k level were cleared out, resulting in close to $80 million in short liquidations being taken out of the market. Following this upward move, most of the liquidity is now concentrated on the long side around the $61,000 level, putting the ball in the bitcoin bulls’ court for the time being.

Bitcoin Spot ETF Flows Regain Momentum

Spot bitcoin ETF flows made a comeback this week, recording five straight days of inflows. The largest inflow came after Wednesday’s CPI print, with over $300 million in institutional flows into bitcoin. The biggest inflow this week was from Ark Innovation’s 21 Shares fund, which saw $131 million. There was only one notable outflow this week, coming from Grayscale’s GBTC on Thursday, with -$51 million. As a whole, the total net assets of bitcoin ETFs now sit at $56.26 billion, just 7.7% away from the all-time high of $61 billion seen on March 12.

Regulatory Hurdles

This week, the Senate passed a bill to overturn SEC rules that prevent regulated financial firms from holding bitcoin and other cryptocurrencies. The House had already approved the bill, which now moves to President Biden, who has indicated he will veto it. Supporters believe changing the rule will enable more institutions to safely offer bitcoin services, potentially increasing institutional investment and driving up bitcoin’s price in the long term. However, opponents, including Biden, argue it could harm investor protections and financial stability. If the veto occurs, Congress would need a two-thirds majority to override it. The outcome of this legislative battle could significantly impact bitcoin’s market dynamics and price trajectory in the coming months, especially during the upcoming election cycle.

Bitcoin Dominance To Continue Higher?

One of the key metrics we’ve been analyzing in this newsletter is bitcoin dominance, which measures bitcoin’s market share relative to other crypto assets. Throughout the week, bitcoin dominance remained in an uptrend while altcoins experienced a sell-off at the beginning of the week, highlighting bitcoin’s strength during times of uncertainty. Additionally, bitcoin dominance is on the cusp of breaking a weekly resistance level above the 56% threshold, which would further solidify its status as the #1 crypto asset in the industry.

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