How Did Bitcoin and Cryptocurrencies Experience Capital Flows in August?

• According to Bitfinex’s latest report, this capital outflow became more pronounced in August, with the crypto market witnessing an outflow of approximately $55 billion from major cryptocurrencies.
• The market struggled for most of the first half of the year, but inflows began in July, led by Bitcoin. During this period, Bitcoin briefly surpassed $30,000 as there was an inflow of over $100 billion into the market.
• Bitfinex’s report shows that this year’s largest capital outflow occurred, particularly for Bitcoin. Much of this outflow resulted from two isolated events that caused significant price movements in a relatively short period.

What kind of capital flow did Bitcoin and cryptocurrencies encounter in August? Critical factors that trigger capital outflow!

Capital Flows in August for Bitcoin and Cryptos

The crypto industry is known for its price volatility, often driven by events and liquidity squeezes. There has been an observed cash outflow from the cryptocurrency market since the beginning of the year, which is not surprising.

According to Bitfinex’s latest report, this capital outflow became more pronounced in August, with the crypto market witnessing an outflow of approximately $55 billion from major cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and stablecoins such as Tether (USDT), USD Coin (USDC), BUSD, Dai, and TrueUSD (TUSD).

Bitfinex’s analysis measured the total realized value metric of major stablecoins and showed that there was an outflow of approximately $55 billion in August.

The crypto market faced challenges for most of the first half of the year, but inflows began in July, primarily led by Bitcoin. During this period, Bitcoin briefly exceeded $30,000, as there was an inflow of over $100 billion into the market. However, momentum shifted in early August, triggered by profit-taking and mixed signals from the U.S. economy. The report stated:

“When looking deeper into the data, a prevailing trend emerges: as August began, the industry started experiencing capital outflows.”

During this period, the interest from institutional investors, especially after heavy inflows into digital asset investment funds, began to decline. This trend continues as capital outflows currently amount to $294 million.

What Triggered the Crypto Capital Outflow?

Bitfinex’s report highlights that this year’s largest capital outflow occurred, especially for Bitcoin. A significant portion of this outflow resulted from two isolated events that led to significant price movements. In particular, the sudden drop on August 17th caused Bitcoin’s price to plummet by 11.4% within a few hours.

“According to Bitfinex Data, August marked the largest red monthly candle for BTC since the bear market low in November 2022 and saw a drop of -11.29%.”

The crypto derivatives market also followed a similar trajectory. Ethereum (ETH) futures and options markets experienced a significant slowdown in 2023. The average daily trading volume is nearly 50% lower than the two-year average, at $14.3 billion daily.

Bitcoin has also experienced some liquidity squeezes; data shows that nearly 69% of the mined Bitcoin has not moved for over a year. On the other hand, this indicates a high level of confidence among investors and reflects an optimistic view of the cryptocurrency’s future.