Bitcoin cooled off Friday after a strong advance tied to heavy buying in U.S. spot Bitcoin ETFs. By Friday afternoon in New York, BTC was trading at $77,379, down more than 3% over the past 24 hours. Earlier this week, it had climbed as high as $81,281.
Pullback follows a sharp ETF-fueled run
Bitcoin Magazine said the rally had been driven by large inflows into U.S. Bitcoin ETFs. In a post on X, the publication said U.S. Bitcoin ETFs brought in $1.14 billion this week, taking total inflows over the past nine days to more than $3 billion.
The move lost momentum on Friday. The report said Federal Reserve Chair Kevin Warsh, in his first major speech as head of the central bank, said he still had more work to do in fighting inflation.
According to the article, bitcoin has previously fallen when the Federal Reserve views inflation as too high, because that lowers the odds of a rate cut. The piece added that bitcoin typically performs better in a lower-rate environment.
Treasury action and sustained ETF inflows supported the rally
Bitcoin Magazine said bitcoin started surging last week after the U.S. Treasury said it would at least double the size of its liquidity-support buyback operations. That announcement weakened the dollar last week, while non-yielding assets benefited.
Citing Farside Investors data, the report said exchange-traded funds managed by BlackRock, Fidelity, and Grayscale have posted net positive inflows for nine consecutive days. Last week was their best week since October, when bitcoin reached a new all-time high, and that stretch continued into this week.
Since Aug. 17, investors have put more than $3 billion into the funds. BlackRock’s iShares Bitcoin Trust took the largest share of those inflows, while Morgan Stanley’s new Bitcoin Trust, which debuted this year, also saw significant inflows.
Report points to the “debasement trade”
The article also said analysts have pointed to the so-called debasement trade as a reason investors are looking at bitcoin again. In that trade, investors buy an asset as a hedge against a currency losing value.
Those taking that view see bitcoin, gold, and other precious metals as protection against excessive government spending. The report added that total U.S. debt crossed $40 trillion for the first time this month.
The story first appeared in Bitcoin Magazine and was written by Mathew Di Salvo.