Bitcoin bear market stage turns consolidation, and BTC and ETH capital flows turn positive

Bitcoin (BTC) benefited from stable buying last week, with the consumer price index (CPI) falling 0.4% month-on-month in June and the annual inflation rate falling to 3.5%. Falling energy prices were the main driver, the largest monthly decline in inflation since 2020.

Markets interpret cooling inflation as a signal that the Fed may delay raising interest rates. After the data was released, cryptocurrency and stock markets responded positively, but questions remain about how long the bullish momentum will last.

The tit-for-tat standoff between the United States and Iran rekindled the hot war last week, pushing oil prices above $85 a barrel. This could complicate the medium-term inflation outlook and increase the possibility of negative spillover effects on stocks.

On Capitol Hill, comments from Wyoming Senator Cynthia Lummis and President Trump's July 16 meeting with a small group of senators raised hopes of progress in crypto regulation.

The Bitcoin and Ethereum (ETH) spot, futures and ETF markets reported strong inflows for the second consecutive week, also improving market sentiment, and new data from Swissblock heralds a return to liquidity in the cryptocurrency market.

Is it time for the bulls to enter?

Overview

Bitcoin rises due to cooling CPI data

Strategy suspends buying, flagship company buying disappears

CLARITY bill hopes to reignite, Trump wields a stick

Funds return to ecology, Bitcoin rises: Can they last?

Focus

Bitcoin rises due to cooling CPI data, strategy suspends buying

June CPI data showed cooling inflation, triggering a surge in risk appetite, and the probability of raising interest rates dropped from 47% to 17%. At the same time, positive profit forecasts from banks and semiconductor manufacturers helped the market maintain its upward trend throughout the week.

Bitcoin rose 6%, reaching as high as $65,600. Strong inflows into the spot, futures and ETF markets further reinforced the positive sentiment of the past two weeks.

Cumulative trading volume of Bitcoin spot and futures Delta (7th)

Dip hunting in late June and early July has transformed into broader market buying. Participants seem to have digested the negative news and are now focusing on Bitcoin's alleged discounts and growing buying momentum. Bitcoin's cumulative volume Delta (CVD), which measures net active purchases and sales, shows a weekly net purchase volume of $997 million.

Perpetual contracts continue to drive Bitcoin prices higher, while spot participation lags significantly, but inflows of funds from Bitcoin ETFs highlight spot buying. From July 10 to July 15, the net inflow of spot Bitcoin ETFs exceeded US$108 million, following a net outflow of US$425 million on July 13.

Total open interest in Bitcoin peaked on July 14 and closed at US$21.35 billion at the day's close due to increased leverage amid the rising CPI. But there was a decline within 24 hours, reflecting an orderly deleveraging. Funding rates remained positive throughout the week, falling to 0.147 over the weekend as CPI-driven traders cut risk as profitable long positions closed positions.

While breaking US$65,000 and turning it into support is crucial to maintaining current trends, key positives this week include:

Bitcoin CVD saw net purchases for the third consecutive day.

Bitcoin briefly broke through US$65,600, entering a short liquidity cluster of US$163 million to US$291 million, extending to US$66,709. This puts the "fuel" squeezed by the bears at hand.

Bitcoin ETF posted net inflows for the third consecutive day last week, with institutional and individual buying confirmed despite current oil price fluctuations.

Bitcoin prices, funds rates, open interest contracts

Strategy (MSTR) suspended Bitcoin purchases, but still raised $466.7 million through equity from July 6 to July 12. While flagship company buying appears to have disappeared, the market has adapted to the concept that Strategy may sell Bitcoin and reduce new purchases.

Trump wields a stick in hopes of rekindling the CLARITY bill

U.S. lawmakers have about four weeks to arrange, review and vote on the CLARITY bill before the August recess. Time is running out, but cryptocurrency advocate Senator Cynthia Lummis of Wyoming spoke publicly this week about progress moving the bill closer to its end.

On July 16, President Trump met with a group of senators to discuss remaining obstacles to passage of the CLARITY Act, including ethical issues related to the president's own cryptocurrency investment activities.

Senator Loomis talks about progress of CLARITY bill

The bill requires 60 votes to move forward. The next step is to merge the Senate Banking Committee and Senate Agriculture Committee versions and then resolve remaining differences between Democrats and Republicans.

Money returns to ecology, Bitcoin rises: Can it last?

Weekly net flows from exchanges and ETFs indicate improved investor interest. On-chain data indicates that the market is exiting the selling stage and entering a "consolidation/bullish transition" period.

According to data from market analysis provider Swissblock:

"After the June decline, the market trend no longer deteriorates. Instead, it is building a consolidation/bullish transition period where selling pressure begins to diminish and market structures stabilize. But this is not the recovery itself, it is the foundation for recovery."

Bitcoin Market Trend Data

Regarding ETF traffic and its impact on Bitcoin prices and market sentiment, Swissblock said that "the storm is over."

"The most overwhelming wave of ETF distribution in this bear market is over. As the Bitcoin risk gradually recedes from the risk of capitulation, spot ETF traffic once again turns slightly positive."

Analysts warned that while "ETF accumulation is positive," it does not show continued strength. They believe this shows that "institutional confidence has not fully returned."

Risk Index and Bitcoin ETF Net Flow

Focus

Can the CVD of Bitcoin and Ethereum maintain net inflows for the third consecutive week? That would be in line with analysts 'view that the worst of the bear market is over and the long consolidation phase has begun.

Will traders plan ahead to deal with possible progress on the CLARITY Act?

The U.S. -Iran war has escalated to new levels, oil prices have risen, and inflation remains a real threat to the U.S. economy. Will the stock market reverse and how will cryptocurrencies react?