Bitcoin: A Low-Volume Lull While the Macro Backdrop Is Quietly Turning

Bitcoin remains caught in a summer lull. Daily volumes are running at $4B per day on trusted exchanges, with similarly subdued activity across equities and other risk assets. In thin markets relatively small flows have an outsized impact on price, so CoinShares remains cautious about reading too much into daily volatility.

The macro backdrop has nevertheless become more supportive. Recent US labour market data were notably weak, including significant downward revisions, with the economy adding an average of only around 20,000 jobs per month over the last three months. The latest CPI print came in broadly in line with expectations and continues to move closer to the Fed’s target.

Weaker employment alongside moderating inflation is normally a clear positive for Bitcoin through lower interest-rate expectations. Bitcoin’s initial reaction was surprisingly muted, which likely reflects the lack of liquidity rather than a deterioration in sentiment. Prices have since begun to recover. Bitcoin has traded almost inversely to gold over the last five days, so it is behaving more like a risk asset than a long-duration asset at present.

Global ETF Flows Don't Provide Any Insights

This week looks set to finish with modest outflows of around $150M, following inflows last week. In exceptionally thin summer trading, CoinShares Research department does not view that as evidence of a meaningful reversal in sentiment. It is more consistent with a market in a holding pattern while investors wait for a clearer signal from monetary policy and economic data. The Jackson Hole Economic Policy Symposium at the end of this month should provide that clarity.