$2 Billion Cash Surge Fuels Bitcoin Rally Despite Lackluster Inflation Reading

A $2 billion cash surge into Bitcoin spot ETFs helped drive the cryptocurrency's price to an intraday high of $79,251.60 on August 26, despite a lukewarm inflation reading from the US Federal Reserve.

The PCE (Personal Consumption Expenditures) inflation index remained at 3.7% for headline and 3.3% core, both still above the Fed's target rate of 2%. However, this was not seen as a catalyst for a September interest rate hike, with odds rising only marginally to around 44%.

According to Glassnode, US-traded spot Bitcoin ETFs absorbed $2.23 billion around Bitcoin's initial squeeze, while Farside Investors' daily tracker showed another $314.3 million of inflows on August 25 alone, led by $284.4 million into BlackRock's IBIT.

The influx of cash helped to absorb supply and push the price higher, with every wallet-size cohort accumulating at the same time. However, this rally was not driven by new speculative longs, but rather by forced buying following short liquidations.

As a result, futures open interest fell 11% during the late-August squeeze while perpetual funding stayed mostly positive. This suggests that the $2 billion cash surge helped to wipe out speculative leverage and push the price higher.