Bitcoin Trapped in Volatile Range as Forced Selling Takes Hold

Bitcoin's price has been stuck in a tight range between $63,700 and $65,500, despite a recent bout of outflows from U.S. spot bitcoin exchange-traded funds (ETFs). The ETFs lost $465 million over two days last week, ending a seven-day inflow streak.

The drawdown has led some analysts to speculate that the outflows are due to forced selling rather than a change in investor conviction. Ethra Invest's Saeed Al-Marri agrees with this assessment, stating that 'longs are being liquidated six times as often as shorts (6 to 1), which tells you this is bullish bets getting wiped out, not a broad exit from the asset.'

The situation is further complicated by the fact that U.S. net liquidity has reached $5.92 trillion, up over 3% in the past 12 weeks. This has led some analysts to point out that the current reading is in the 80th percentile of every weekly observation since 2003.

The next major test for bitcoin will come on August 12, when the Bureau of Labor Statistics releases its Consumer Price Index (CPI) report for July. A hot inflation number could pressure the Federal Reserve to hold rates higher for longer, tightening liquidity conditions and potentially impacting the price of bitcoin.