Bitcoin falls as ETF outflows and inflation concerns weigh on sentiment

Bitcoin (BTC) fell below the $64,000 level on Tuesday as oil prices climbed and uncertainty persisted over the deadlock in negotiations between the United States and Iran, weighing on investor appetite for risk assets.

Weakening institutional demand also contributed to the decline after US-listed spot Bitcoin exchange-traded funds (ETFs) recorded outflows at the start of the week on Monday, adding short-term pressure on the world's largest cryptocurrency and keeping investors cautious.

US-Iran deadlock raises inflation risks

US President Donald Trump responded on Monday with demands of his own to Iran's conditions for reaching a peace agreement, calling on Tehran to pay compensation for people killed in wars, attacks and protests, an escalation in rhetoric that is likely to complicate efforts to reopen the vital waterway, according to Reuters.

The deadlock between the United States and Iran over a potential peace agreement and the reopening of the Strait of Hormuz has increased geopolitical uncertainty, pushing oil prices higher while putting pressure on risk assets such as Bitcoin.

Higher oil prices could revive inflationary pressures and potentially push the Federal Reserve toward a more hawkish monetary-policy stance.

According to the CME FedWatch Tool, market participants are currently pricing in a 51.3% probability that the Federal Reserve will raise interest rates by 25 basis points in September, up from 44.1% on Friday.

ETF outflows return as investor sentiment weakens

Institutional demand for Bitcoin started the week on a negative note. Data from SoSoValue showed that US spot Bitcoin ETFs recorded net outflows of $144.67 million on Monday, ending a five-day streak of inflows.

If these outflows persist and accelerate through the rest of the week, Bitcoin could face further selling pressure and additional price declines.