Bitcoin (BTC) remains under pressure, falling more than 4% this week and trading around $76,900 at the time of writing on Friday.
Signs of weakening institutional demand are emerging, with US spot Bitcoin exchange-traded funds (ETFs) on track to end a three-week inflow streak after recording nearly $500 million in net outflows through Thursday.
At the same time, stronger-than-expected US Producer Price Index (PPI) data have strengthened expectations for an interest rate hike in September, adding further pressure on Bitcoin.
Traders are now focused on the US Consumer Price Index (CPI) report due on Friday for further signals on the Federal Reserve’s monetary policy path, which could determine the short-term direction of the world’s largest cryptocurrency.
Institutional demand weakens
Bitcoin institutional demand indicators are showing early signs of weakness this week.
Data from SoSoValue showed that spot Bitcoin ETFs are on track to end a three-week inflow streak after recording $449.44 million in net outflows through Thursday.
If withdrawals continue and intensify on Friday, Bitcoin could face further price correction.
Focus turns to US inflation data
On the macroeconomic front, US inflation data continue to weigh on Bitcoin.
The US Bureau of Labor Statistics (BLS) reported on Thursday that headline producer price inflation accelerated to 5.4% year-on-year in August, up from an upwardly revised 4.8% in the previous month and above estimates of 5.3%.
Excluding food and energy, core PPI came in line with expectations, rising 4.6% year-on-year compared with 4.3% in July.
The data come amid inflationary risks from higher energy prices, strengthening expectations that the US central bank will raise borrowing costs next week.
According to the CME FedWatch Tool, the probability of an interest rate hike at the September 15-16 meeting has risen to around 70%, compared with 60% last week.
Market participants are now awaiting the US Consumer Price Index data on Friday. If the figures come in strong, they could push the US dollar higher, potentially adding further pressure on Bitcoin.
Escalating Middle East tensions lift oil and weigh on Bitcoin
Escalating tensions between the United States and Iran near the Strait of Hormuz continue to drive energy prices higher, weaken risk appetite and put pressure on the world’s largest cryptocurrency.
Iran said it attacked 10 vessels around the Strait of Hormuz after the United States announced that it had sunk five Iranian oil tankers.
In addition, Iran-backed Houthis in Yemen seized the strategic Red Sea port city of Mokha, expanding their control around the strategically important Bab el-Mandeb Strait and increasing market concerns that oil supply disruptions could persist for an extended period.
US President Donald Trump said the war with Iran is likely to continue beyond the US midterm elections in November.
These developments pushed crude oil prices to their highest level since May 21, keeping the geopolitical risk premium elevated and adding further pressure on Bitcoin.