Bitcoin nears key resistance as softer US inflation boosts sentiment, while ETF flows remain mixed

Bitcoin approached a key technical resistance zone around $65,160 during Wednesday's trading after weaker-than-expected US inflation data improved investor appetite for risk assets. However, flows into spot Bitcoin exchange-traded funds (ETFs) remained mixed, reflecting continued caution among institutional investors.

Data released by the US Bureau of Labor Statistics on Tuesday showed the Consumer Price Index (CPI) fell 0.4% month-over-month in June, marking the largest monthly decline since April 2020 and exceeding expectations for a 0.1% decline.

Core inflation, which excludes food and energy prices, was unchanged during the month, compared with expectations for a 0.2% increase. On an annual basis, headline inflation slowed to 3.5%, while core inflation eased to 2.6%, with both readings coming in below market forecasts.

The data reduced expectations for additional US interest rate hikes, weighing on the US dollar and supporting risk assets. Bitcoin rallied about 4.35% by the close of Tuesday's session.

However, the rally lost some momentum after Federal Reserve Chair Kevin Warsh reiterated that the central bank would not tolerate persistently elevated inflation while emphasizing the underlying strength of the US economy.

Warsh said, "If we implement the right policy—and we will—the inflation wave of the past five years will become a thing of the past."

Despite the support from the inflation report, analysts believe investors should remain cautious, as the recent rise in oil prices—driven by renewed tensions between the United States and Iran and the closure of the Strait of Hormuz—could reignite inflationary pressures and strengthen the case for tighter monetary policy, weighing on Bitcoin.

Investors are now awaiting the release of the June US Producer Price Index (PPI), which could provide additional clues about the future path of Federal Reserve policy and trigger increased volatility across risk assets.

Meanwhile, flows into spot Bitcoin ETFs remained mixed. Data from SoSoValue showed net inflows of $181.08 million on Tuesday, following net outflows of $424.66 million in the previous session.

These mixed flows suggest institutional investors remain divided and cautious amid ongoing geopolitical tensions between the United States and Iran, preventing a clear short-term directional trend from emerging for Bitcoin.