Bitcoin opened the week strong following the Bitcoin Conference in Nashville last weekend, where former President Trump made a bullish keynote speech about bitcoin and the crypto industry. In his speech, he promised to create a bitcoin strategic reserve, replace current SEC Chair Gary Gensler, and implement a crypto advisory council in his administration.

The market reacted positively to his comments. As previously on prediction markets, the odds of him announcing a bitcoin strategic reserve were around 33%. It was not surprising to see bitcoin with a strong weekly open, starting the Sunday futures open trading around $69,000. By NYSE open on Monday morning, bitcoin was trading slightly over $70,000, just 6% away from the all-time high. However, this brief visit to the highs was quickly sold off upon news of the US government moving $2 billion worth of seized bitcoin.

According to Arkham Intelligence, a wallet associated with the DOJ’s Silk Road funds moved 29,800 BTC to an unknown address, with 10,000 BTC suspected to be deposited into institutional custody. This news sparked a sell-off, with bitcoin trading as low as $67,000 intra-day.

Price hovered in the mid-$60,000s until Wednesday, when Fed Chair Powell gave his 5th FOMC press conference of the year. Powell had a more dovish tone this time, hinting at a higher likelihood of a rate cut coming as soon as September, and the possibility of additional cuts later in the year. Although equity markets responded positively to the dovish outlook, the same correlation did not appear in bitcoin, with the Nasdaq finishing 3% up on the day while bitcoin slumped over 2% back down to $63,600, nearly $6,500 down from the weekly open.

Election Betting Odds Influencing Crypto

Bitcoin not following the tech sector could be attributed to the sharp decrease in Trump’s betting odds of becoming president. After achieving an average high of 66% on various prediction markets, the middle of the past week saw his odds drop to nearly 50%. Given that a Trump-appointed cabinet would pursue pro-crypto policies, and with a bitcoin strategic reserve bill already proposed by Senator Cynthia Lummis, it seems that bitcoin and crypto investors began repositioning as Trump’s lead slid against Democratic candidate Kamala Harris.

A few weeks ago, during the attempt on Trump’s life, there was a clear correlation with bitcoin rallying as the market priced in a higher chance of a pro-crypto administration. It is possible this past week we are seeing a similar causation but in reverse.

Bitcoin Drops Further After Disappointing Non-Farm Payroll Release

Bitcoin continued to slump into Thursday until it was announced that MicroStrategy would be raising $2 billion in equity for additional bitcoin holdings. This caused a temporary rally, allowing bitcoin to close up over 1% back above $65,300.

This temporary rise was reversed by the time the NFP release came out at 8:30 AM EST the next morning, with only 114,000 jobs added in July, below the expected 175,000. The unemployment rate rose to 4.3% from 4.1%, and revisions to May and June’s figures resulted in 29,000 fewer jobs than previously reported.

This data sent equity markets into a downward spiral along with bitcoin, signaling potential economic weakness, leading to reduced investor confidence and increased risk aversion across most asset classes. Furthermore, the chances of a much deeper rate cut increased significantly toward the end of the year, with the odds of a 100 basis point cut rising from 7% the week prior to 27.8% immediately after the release.

Although typically deeper rate cuts would be bullish for risk-on assets, the market viewed this more aggressive monetary loosening policy negatively, as it implied the economy and labor market were indeed in trouble, and a recession could be on the horizon. Ultimately, bitcoin continued to sell off for the rest of the day, dropping by over 10% from the opening week’s highs to close at $61,420.

Spot ETF Flows Update

This week saw the first weekly net outflows of bitcoin spot ETFs in over four weeks, with over $80 million in outflows. Total net assets now stand at $57.2 billion, about $5 billion off the record high seen last week. Friday saw the largest amount of outflows since late April, with over $237 million in outflows, the largest of which came from Fidelity’s FBTC fund with over $104 million of bitcoin exiting.

Bitcoin Dominance

One silver lining for bitcoin bulls this week despite the negative price action was the increase in the bitcoin dominance metric. This metric measures the percent of the total crypto market cap that is in bitcoin. The past two weeks have shown a strong break above the 56% threshold, implying that more capital is flowing out of the altcoin space and into the relative safety of bitcoin.

This past week saw a much deeper correction in most altcoins, while bitcoin was able to maintain the stable range it has been in for the past few months.

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