Bitcoin has traded flat for the past five days, hovering around the $29,000 mark, with traders taking a cautious approach ahead of the latest U.S. inflation reading on Thursday.
The world's largest digital asset by market capitalization has held to a tight trading range for the past two months, with on-chain metrics pointing to a sentiment for accumulation in anticipation of a price break-out. Bitcoin was changing hands for $29,017 at 10:00 a.m. ET, according to CoinGecko.
According to a Blockware Intelligence newsletter, liquidity is at a multi-year low for the digital asset.
"The amount of liquid and highly liquid supply is at its lowest levels since 2018. Meanwhile, the amount of illiquid supply continues to reach new all-time highs. Traders are exchanging a shrinking supply of coins back and forth while long-term holders steadily stash away into cold-storage," Blockware stated.
A price-break out for bitcoin could arrive on the back of multiple macro-economic conditions, not least a pause in Federal Reserve rate hikes.
"Everyone will be watching the U.S. inflation report as a cool report could help support soft landing hopes and seal the deal for some that the Fed is done raising rates," senior market analyst Ed Moya said in a note.
Fed rate pause anticipated
The expectation amongst analysts at Oanda is that July's Consumer Price Index report will show headline inflation rising to the mid-3% range, but the more important core rate slowing to 4.7%.
"The money markets are expecting the Federal Reserve to take a pause at the September meeting, with a probability of 84%, according to the FedWatch. It’s entirely possible that the Fed is done with tightening, but that will depend to a large extent on upcoming inflation and employment data," market analyst Kenny Fisher added in a Monday note.
Bitcoin investment products see significant outflows
Digital asset investment products, such as Grayscale and CoinShares, saw outflows this week totaling $107 million, as institutional investors gathered profits. According to a CoinShares report released Monday, bitcoin was again the primary focus, seeing outflows totaling $111 million, the largest weekly amount since March.
Overall volume is down for digital asset trade on centralized exchanges and for institutional investment products.
"The summer doldrums are in full force with weekly trading volumes in crypto investment products 36% below the year-to-date average, but in the broader on-exchange market volumes have suffered more, down 62% relative to the year to date average," CoinShares shared in a note sent to The Block.
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