Bitcoin faces short-term pressure from the Fed and institutional outflows

Bitcoin (BTC) staged a rebound after three consecutive sessions of decline, reflecting the market’s attempt to stabilize prices following a period of heightened volatility.

However, capital flow data highlights growing caution: institutional outflows have totaled nearly $970 million across four straight sessions, signaling that large funds are reducing risk exposure ahead of key monetary policy events.

The primary factor shaping Bitcoin’s short-term outlook lies in the policy direction of the U.S. Federal Reserve (Fed). July data showed the Producer Price Index (PPI) rising sharply by 0.9% m/m, while core CPI remained elevated at +0.3% m/m—evidence that inflationary pressures have not fully eased.

At the same time, domestic consumption has begun to soften, with retail sales up only 0.5% and the University of Michigan’s consumer sentiment index retreating to multi-month lows. This leaves the Fed in a dilemma: the economy is not weak enough to justify immediate rate cuts, but it is cooling sufficiently to make expectations of easing later this year appear reasonable.

Against this backdrop, Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole Symposium is seen as a pivotal event. A more dovish tone acknowledging slower growth risks could provide short-term support for Bitcoin. Conversely, a firm commitment to a hawkish stance in order to contain inflation may trigger sharper corrections in BTC and other risk assets.

Another key development is the flow of funds into U.S.-listed Bitcoin ETFs. After record inflows earlier in the year, recent data show choppy and inconsistent movements, reflecting diverging sentiment among institutional investors. With U.S. Treasury yields still elevated, many large investors continue to favor fixed-income instruments over risk assets. However, should real yields begin to decline, ETFs could swiftly reverse and attract strong inflows again, amplifying any recovery momentum in Bitcoin.

Beyond monetary policy, geopolitics continues to exert indirect influence on Bitcoin’s outlook. The Russia–Ukraine conflict remains unresolved, while tensions in the Middle East and risks of wider escalation persist. Traditionally, gold serves as the go-to safe haven, but Bitcoin is increasingly being viewed as a “non-sovereign asset” in times of uncertainty. That said, its high volatility prevents it from fully substituting gold in the near term, with its safe-haven role only becoming pronounced when global capital flows pivot toward risk-off positioning.

From a behavioral standpoint, profit-taking pressure after Bitcoin’s strong rally earlier this year remains present. Short-term investors are capitalizing on gains amid macroeconomic uncertainty, while fresh capital inflows are hesitant. This makes Bitcoin highly sensitive to news and macro data releases, leaving it vulnerable to sharp short-term pullbacks.

In the near term, Bitcoin’s trajectory will largely hinge on Fed policy guidance and movements in U.S. bond yields. If 10-year TIPS yields ease and the U.S. dollar weakens, BTC could regain upward momentum. Conversely, a hawkish Fed stance would likely exert further downside pressure, especially given ongoing institutional outflows.

Over the longer horizon, however, the outlook remains constructive. The continued expansion of the Bitcoin ecosystem, growing participation from traditional financial institutions, the development of ETFs, and Bitcoin’s rising role as “digital gold” provide strong structural support for a sustained long-term uptrend.