Bitcoin extends gains as ETF inflows and Middle East stability boost sentiment

Bitcoin extended its gains on Thursday, climbing above the $64,800 level after breaking through a key resistance zone, supported by sustained institutional demand and improving appetite for risk assets.

The cryptocurrency was also supported by spot Bitcoin ETF inflows, which recorded a third consecutive day of positive net inflows this week, while easing geopolitical tensions in the Middle East fueled optimism that the Strait of Hormuz could soon reopen.

Easing tensions support risk assets

Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday that Tehran had entered the final stages of preparing an agreement with Oman to regulate shipping through the Strait of Hormuz.

Meanwhile, reports citing a senior Gulf official said there is a 50% chance that Iran and Oman will reach an agreement on the strategic waterway by Friday.

These developments have strengthened hopes for the reopening of one of the world's most important oil shipping routes, contributing to lower crude prices during the week.

Analysts believe that continued weakness in oil prices could ease pressure on energy markets, reduce inflation risks, and lessen the need for further Federal Reserve policy tightening, supporting demand for higher-risk assets such as Bitcoin.

US economic data reinforces expectations

On the economic front, ADP reported that US private-sector employment increased by 44,000 jobs in July, down from 98,000 in the previous month and below market expectations of 70,000.

Meanwhile, the Institute for Supply Management (ISM) said its services PMI edged up to 54.1 in July from 54.0 in June, although the reading fell short of analysts' expectations of 54.5.

Following the data, market expectations for a Federal Reserve interest rate hike at the September meeting fell to around 55%, down from 67% at the beginning of the week, according to the CME FedWatch Tool. The shift weighed on the US dollar and supported demand for risk assets, including Bitcoin.

Institutional demand remains supportive

Institutional demand continued to provide support for the cryptocurrency market, with data from SoSoValue showing that US spot Bitcoin ETFs recorded net inflows of $244.42 million on Wednesday, marking the third consecutive session of positive inflows this week.

Analysts believe that sustained or stronger inflows over the coming days could provide additional momentum for Bitcoin's recovery and help extend its current rally.