Fed vs inflation: Bitcoin gets squeezed

August 05, 2025

 

Reading time: 5 minutes

Record ETF outflows rock Bitcoin as Fed pivot bets clash with inflation fears

Key points:

  • U.S. Bitcoin and Ethereum ETFs saw outflows of $333M and $465M, the largest since their launch, raising concerns about the sustainability of Q2’s rally.

  • Despite rising rate cut expectations, inflation concerns and waning long-term bullish sentiment have pushed Bitcoin’s options market into neutral territory.

News - Bitcoin and Ethereum ETFs suffered a major blow Monday, recording $333 million and $465 million in outflows, respectively: the largest daily withdrawals since their launch. BlackRock’s IBIT alone saw $292 million pulled, while its Ethereum fund shed $375 million, ending a 21-day inflow streak. The retreat signals investor caution after months of inflows drove Q2’s crypto rally.

Surprisingly, both assets still managed modest gains, with Bitcoin rising 0.74% to hover near $114,000. Analysts credited a tech-led U.S. stock market rebound and rising speculation of a Federal Reserve rate cut as temporary stabilizers.

Fed rate cut hopes rise, but so do risks - According to CME’s FedWatch tool, the probability of a September rate cut has surged to 92.2%, fueled by downward revisions to U.S. job data and weakening labor indicators. Goldman Sachs now expects three consecutive cuts starting in September, and other institutions like UBS project up to 100 basis points of easing through year-end.

However, macro risks are far from resolved. President Trump’s dismissal of the Bureau of Labor Statistics chief and rising tariffs have stoked inflation fears. JPMorgan forecasts global core inflation to hit 3.4% in H2 2025, complicating the Fed’s path forward.

Options market signals cooling conviction - The crypto options market also hints at weakening optimism. The 180-day BTC skew has dropped to zero, showing a neutral stance among long-term traders. According to BloFin’s Griffin Ardern, this marks a significant shift from bullish sentiment and mirrors patterns seen ahead of the 2022 bear market.

Trump’s anti-debanking order targets crypto discrimination, regulatory overreach

Key points:

  • A draft executive order would penalize banks for dropping crypto firms or political groups based on beliefs, directing regulators to probe violations.

  • The move follows allegations of “Operation Chokepoint 2.0,” and may compel banks to revise policies that excluded digital asset companies.

News - The White House is finalizing an executive order that would penalize financial institutions for terminating accounts based on ideological or political grounds. The directive, expected to be signed by President Trump this week, instructs regulators to investigate whether banks violated equal credit, consumer protection, or antitrust laws by debanking crypto firms and conservative groups.

The measure builds on months of pressure from industry leaders who have accused regulators under the previous administration of systematically cutting off banking access to digital asset companies. Coinbase’s legal team cited internal FDIC documents and testimonies to support claims of regulatory coercion. Critics labeled the practice “Operation Chokepoint 2.0,” echoing past federal tactics used to target disfavored sectors like payday lending.

From draft to directive: What the order proposes - According to reports, the order calls for:

  • An overhaul of bank regulator policies that may have enabled debanking

  • Reviews by the Small Business Administration into bank partner behavior

  • Referrals of violations to the Department of Justice for enforcement

Though no specific bank is named, the draft references a case where Bank of America shut down a Christian nonprofit’s account operating in Uganda. It also highlights instances where banks allegedly aided federal investigations into political activity, including the January 6 Capitol riot.

Industry reaction: “Floodgates may open” - Former Binance CEO Changpeng Zhao called the move a potential breakthrough. Others, like Andreessen Horowitz’s Alex Rampell, warned that even with the order, banks may find indirect ways to restrict access, such as inflating fees or throttling fintech services.

Still, if enacted, the directive could reshape access to banking for crypto firms and redefine how ideology intersects with finance.

Litecoin rally ignites: ETF hopes, $100M buy-in, and payment surge fuel momentum

Key points:

  • Litecoin surged over 40% in the past month, driven by a $100 million corporate treasury buy, rising payment adoption, and ETF optimism.

  • Traders are eyeing the $124–$131 zone as potential breakout resistance, with analysts citing LTC’s commodity status as a regulatory advantage.

News - Litecoin (LTC) has emerged as one of the strongest altcoin performers this month, jumping more than 40% to hit a five-month high of $128.40 before pulling back to around $123.60. The rally was ignited by MEI Pharma’s surprise $100 million allocation to Litecoin as part of its pivot into a crypto treasury model.

Analysts believe this corporate buy-in, reminiscent of early Bitcoin treasury plays, is the primary catalyst behind LTC’s momentum, more so than recent ETF rumors. According to Illia Otychenko of CEX.IO, the ETF odds have remained high since February and are merely resurfacing amid broader altcoin rotation.

Still, ETF speculation remains strong. Bloomberg analysts place the chances of approval at 90%, with LTC’s commodity classification by the CFTC reducing legal risk. Canary Capital, Grayscale, and CoinShares have all filed to launch Litecoin ETFs in 2025.

Real-world use is rising - Litecoin is also climbing the ranks in crypto payments. According to CoinGate, it became the second-most used payment coin on the platform in July, surpassing stablecoins like USDC and trailing only Bitcoin. The Litecoin MWEB privacy upgrade has also gained traction, with balances nearing 170,000 LTC.

Market outlook: $131 in focus - Analysts are watching the $124 to $131 range as the next resistance zone. The recent breakout above the 7-day moving average, combined with a weekly EMA golden cross, suggests that if momentum holds, Litecoin could target a return to its all-time highs. Still, early MACD divergence hints at the need for sustained inflows to maintain the uptrend.

Coinbase’s $2B raise divides markets as Base outage reignites centralization debate

Key points:

  • Coinbase announced a $2 billion dual-tranche convertible note sale for buybacks and acquisitions, despite recent revenue declines and regulatory pressure.

  • Its Base Layer-2 chain suffered a 29-minute outage, prompting criticism over Coinbase's control of the sequencer and renewed decentralization concerns.

News - Coinbase has unveiled plans to raise $2 billion through convertible senior notes, with $1 billion maturing in 2029 and another in 2032. The private offering targets institutional buyers and may fund stock buybacks, working capital, or acquisitions. This move positions Coinbase as a key bridge between crypto-native finance and traditional capital markets, potentially making it the first S&P 500 company to use such proceeds to acquire Bitcoin.

The announcement comes amid growing scrutiny over the company’s Layer-2 blockchain, Base, which halted block production for 29 minutes due to an “unsafe head delay.” This marked its first outage since 2023 and affected critical functions like deposits and withdrawals. With over $4.2 billion in total value locked, Base plays a significant role in Ethereum’s L2 ecosystem, particularly with $1.5 billion flowing through the Morpho lending protocol.

Funding and fallout - While Coinbase aims to use the fresh capital for long-term growth and strategic buys, possibly including more Bitcoin, its financial health remains in flux. COIN shares are down 25% quarter-over-quarter, and the company’s recent 17% post-earnings plunge was tied to a data breach and weak revenue. Still, its stake in Circle and the planned acquisition of Deribit suggest an aggressive expansion strategy is underway.

Centralization in question - The Base outage has sparked renewed concerns about centralized sequencers in roll-up networks. Since Coinbase runs Base’s only sequencer, critics argue the setup creates a single point of failure. Analysts estimate the model could generate $30 million annually, but the lack of transparency around fee use has amplified skepticism within the Ethereum community.

Interesting facts

  • Pakistan launched its government-led Strategic Bitcoin Reserve in May 2025, appointing Bilal Bin Saqib as CEO of the newly formed Pakistan Crypto Council and leveraging 2,000 MW of surplus electricity for mining and AI data centers: a unique intersection of energy policy and sovereign crypto strategy.

  • Bullish crypto exchange backed by Peter Thiel is preparing a U.S. IPO with a target valuation of around $4.2 billion, planning to raise over $629 million and convert most proceeds into U.S.-dollar-denominated stablecoins, highlighting new institutional confidence in crypto platforms.

  • The CFTC has authorized spot crypto contracts trading on CFTC-registered futures exchanges, under a joint initiative with theSEC, marking the first time U.S. federal regulators have formally permitted such trading, boosting access and regulatory certainty.

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Top 3 coins of the day

Mantle (MNT)

Key points:

  • At the time of writing, MNT was priced at $0.86, logging a 3.06% gain over the last 24 hours.

  • The Madrid Ribbon flipped bullish as green bands widened, while the EWO stayed firmly positive above 5.5.

What you should know:

Mantle continued its explosive run after clearing the $0.82–$0.85 resistance zone, pushing toward levels last seen in Q1. Volume surged to its highest in over three months, confirming strong demand amid broader market uncertainty. The bullish structure of the Madrid Ribbon indicates sustained upward pressure, supported by the expanding green curves. Meanwhile, the Elliott Wave Oscillator (EWO) remained in positive territory, reflecting healthy momentum. Adding fuel to the rally, traders have been reacting to Mantle’s growing ETH reserves and buzz around the upcoming UR neobank launch on August 8. The move also came amid speculation around Layer 2 token momentum, contributing to MNT’s broader 30-day rally of over 54%. If MNT holds above the $0.85 breakout zone, the next resistance sits near $0.97. However, overbought conditions may trigger short-term consolidation. Traders should keep an eye on volume and oscillator weakening for early reversal signs.

POL (POL)

Key points:

  • POL traded at $0.21, rising 1.7% over the last 24 hours after reclaiming the psychological $0.20 mark.

  • The price remained just below the Bollinger Band midline, while the Squeeze Momentum Indicator printed larger red bars, suggesting ongoing bearish pressure.

What you should know:

POL extended its recovery after bouncing from the $0.18 zone, though the uptrend showed signs of caution. The price failed to decisively close above the Bollinger Band’s basis line, signaling that bulls still face resistance around current levels. Meanwhile, the Squeeze Momentum Indicator printed larger red bars, indicating continued bearish momentum rather than a reversal just yet. Despite this, external factors may have influenced short-term optimism. A whale moved $762K worth of POL off Binance, typically a sign of accumulation. Additionally, Polygon’s involvement with Spain’s EU-compliant tokenized platform BeToken has elevated real-world demand narratives around the asset. For the rally to strengthen, POL needs to flip the Bollinger Band midline into support and target $0.23. Until then, buyers may remain cautious in the face of lingering downside momentum.

Solana (SOL)

Key points:

  • SOL was trading at $169 at press time, dipping 0.23% on the day after a failed rebound attempt past the $170 zone.

  • The price remained below the 9-day SMA, while the Stochastic RSI hovered near the oversold region, hinting at weak momentum.

What you should know:

SOL struggled to regain bullish footing as the price slipped below the short-term moving average. Volume showed signs of tapering after the early August spike, suggesting buyers were hesitant to chase higher levels. The Stochastic RSI also stayed in the lower range, indicating that the recent bounce lacked strong follow-through. Despite the dip, interest around Solana remained elevated thanks to bullish external drivers. The global rollout of the Seeker smartphone on August 4 brought fresh attention to Solana’s mobile Web3 ambitions, while Bit Mining and Exodus disclosed multi-million-dollar SOL acquisitions, signaling institutional confidence. For buyers, the $165–$170 zone remains a key support area to defend. A daily close above the 9-day Simple Moving Average (SMA) could reignite bullish sentiment, with resistance sitting near the $176 level. Otherwise, further downside may revisit the $155 demand zone if volume continues to decline.

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