In a subtle but significant shift on Friday 22nd, Federal Reserve Chair Jerome Powell’s address at the Jackson Hole symposium was interpreted by many investors as a sign of his openness to begin cutting interest rates by 25 basis points. This dovish tilt sent a wave of optimism through the markets, suggesting that the central bank may be poised to ease its monetary policy. American stock exchanges reacted positively, with major indices showing considerable gains. Underscoring this shift in market expectations, the CME FedWatch Tool now indicates an 84.1% probability of a rate cut, a marked increase from 73.1% prior to the event.
The impact of Powell's remarks extended decisively to the Digital Assets. Bitcoin saw a notable surge, approaching the $117,000 level following the speech, while the positive sentiment had an even more significant effect on Ethereum, which surged past its previous all-time high to set a new historical record. As a result of these developments across all markets, participants are now closely monitoring the performance of these assets in the coming weeks for further indications of market direction.
Bitcoin's price has faced significant headwinds this week, with market sentiment turning cautious following its record high earlier in the month. This shift is clearly reflected in the activity of spot Bitcoin ETFs, which have experienced substantial and consecutive days of withdrawals.
The trend of negative flows indicates a clear risk-off attitude among investors. Spot Bitcoin ETFs saw net outflows of $523 million on Tuesday, August 19th, a figure that was followed by another $315 million in outflows on Wednesday and $194 million on Thursday. These heavy withdrawals have completely reversed the inflows recorded in the prior week.
This market condition is attributed primarily to significant profit-taking and liquidations. Following BTC’s surge to a new all-time high in early August, many investors are now choosing to secure gains, which has added to the selling pressure and contributed to the current price consolidation.
Notably, this prevailing cautious sentiment has proven resilient. Despite a dovish speech from Federal Reserve Chair Jerome Powell on Friday, the resulting upward momentum was short-lived. Following a brief post-speech rally, the price of Bitcoin quickly pulled back, with the market now consolidating in the $112,000 to $113,000 range.
Ethereum has reached a new all-time high, surpassing the $4,878 mark for the first time since 2021. The surge was driven by a wave of market optimism, catalyzed by comments from the Federal Reserve that hinted at a potential interest rate cut. This movement reflects not only positive market sentiment but also growing confidence in the digital asset, which has benefited from a more favorable regulatory environment and maturing technologies.
The primary driver behind this optimism is the significant movement of institutional money. While Spot Ethereum ETFs have recorded substantial inflows demonstrating tangible demand from traditional investors, they are not immune to market volatility. For instance, during a last week of negative sentiment, these funds also experienced net outflows of over $800 million from 18th to 20th of August. Despite these short-term withdrawals, the broader trend of adoption continues, with large corporations adding ETH to their balance sheets— mirroring MicroStrategy's model with Bitcoin—which signals strong conviction in Ethereum's long-term potential as a global settlement layer and a platform for asset tokenization.
Following a week of heavy profit-taking and ETF outflows that led to a correction, the digital asset market enters the next week in a clear holding pattern, with Bitcoin's price consolidating in the $112k-$113 range. The next directional move will critically depend on U.S. macroeconomic data, with a special focus on the Core PCE inflation index set to be released on Friday, the Federal Reserve's preferred indicator. A higher-than-expected number could reinforce the outlook for higher-for-longer interest rates, pressuring the market to test the critical support level of $110k-$112k. On the other hand, softer inflation data could confirm optimism and fuel a recovery towards the $118k resistance. Until then, contained volatility and sideways trading are expected.
The era of Bitcoin as a purely retail asset is evolving, evidenced by the accelerating participation from institutional players. These entities, ranging from corporate treasuries to nation-states, now collectively hold over 3.8 million Bitcoin. An analysis of these holdings reveals a clear dominance by regulated and corporate vehicles. Exchange-Traded Funds (ETFs) have emerged as the single largest holder category, commanding 40% of the total. Publicly traded companies are the second most significant group, holding 26.8%. The combined weight of these two categories alone accounts for 66.8% of all institutionally-held BTC, signaling a strong validation of Bitcoin's long-term value proposition in the eyes of investors and corporate strategists.