Analysts Elucidate Bitcoin’s July Decline

At the end of July, the market became “fragile” due to a collapse in liquidity and fluctuations in demand for spot ETFs. This conclusion was reached by analysts at Arab Chain.

According to experts, one reason for the July downturn was a liquidity shortage. The volume of bitcoin available for sale on exchanges fell to record lows. In a normal situation, this could have pushed the price up. However, due to a weak influx of new buyers, the market was too “thin,” analysts noted. As a result, even small sales exerted noticeable pressure on quotations.

The second factor was the instability of demand for ETFs. Analysts recorded sharp spikes in inflows into instruments based on the first cryptocurrency, followed by equally strong outflows. During fund withdrawals, there was no alternative demand to offset the pressure from sellers. This deprived the market of support from major institutional players.

The third reason was weak accumulation by “smart addresses.” Although some large wallets continued to buy bitcoin, the pace of accumulation was slow and could not influence the situation. According to experts, this “hidden demand” was not active during the downturn. As a result, the market lost stability.

Outflow from Spot ETFs

On August 4, $292.5 million was withdrawn from BlackRock’s IBIT. This was the largest daily outflow from the fund in the past two months.

The withdrawal occurred amid a drop in the price of the first cryptocurrency. Over the weekend, the asset fell by 8.5% to $112,300, before recovering to $115,000. A small withdrawal on August 1 also interrupted a 37-day streak of capital inflows into IBIT.

Spot bitcoin ETFs in the US have recorded a net outflow for the third consecutive trading day. Investors withdrew about $40 million from the Fidelity Wise Origin Bitcoin Fund (FBTC) and $10 million from the Grayscale Bitcoin Trust (GBTC). The exception was Bitwise (BITB), which received $18.7 million.

Bloomberg analyst Eric Balchunas noted that digital assets and hedge funds are capturing market share from private structures this year.

BATTLE OF THE ALTS: Private asset boom is cooling off while digital assets, hedge funds steal market share in flows this year.. nice look at the breakdown in alternative asset flows from @denitsa_tsekova pic.twitter.com/UHjRlloUp0

— Eric Balchunas (@EricBalchunas) August 4, 2025

JPMorgan expert Nikolaos Panigirtzoglou confirmed the trend in a comment for Bloomberg:

“This year we are seeing an acceleration of inflows into digital assets and hedge funds, which sharply contrasts with weak performance in private equity and lending.”

According to CoinShares, capital inflow into digital assets is the fastest-growing segment of the alternative market. As of July 22, the category attracted $60 billion following a record $85 billion last year.

Balchunas also stated that bitcoin’s volatility has decreased since the launch of spot ETFs.

VOL KILLER: Since the launch of the ETFs the volatility on bitcoin has plumetted. The 90-day rolling vol is below 40 for the first time- it was over 60 when the ETFs launched. I threw in $GLD for perspective. Less than 2x gold, used to be over 3x. pic.twitter.com/r1S7WztJ4i

— Eric Balchunas (@EricBalchunas) August 4, 2025

The 90-day rolling volatility for BlackRock’s IBIT fund fell below 40 for the first time. At the time of the ETF’s launch in January 2024, it exceeded 60.

“This has helped bitcoin attract even bigger fish and gives it a chance to be accepted as a currency,” added Balchunas.

From July 26 to August 1, $223 million was withdrawn from cryptocurrency funds — the first time in 15 weeks.