Institutional Money Pours Back In… Will Crypto Market Surpass $2.23 Trillion?

▲ Cryptocurrency ©Go Da-sol

As institutional funds returned, the cryptocurrency market also moved again. With capital inflows into Bitcoin (BTC) spot ETFs, coupled with regulatory expectations and a short squeeze (buying pressure occurring to liquidate or cover short-selling positions), the total market cap rose by 0.55% in 24 hours, reaching $2.21 trillion.

According to CoinMarketCap, a cryptocurrency market aggregation site, on August 7 (local time), the key driver behind the cryptocurrency market's rebound was institutional capital inflow through Bitcoin spot ETFs. On that day, these ETFs saw a net inflow of $109 million, with BlackRock's iShares Bitcoin Trust leading the trend. BlackRock net bought Bitcoin for four consecutive trading days, bringing its cumulative purchases this week to $604 million.

The cryptocurrency market also showed an upward trend, sharing macroeconomic factors and exhibiting a high correlation of 84% with gold. On the regulatory front, news that U.S. Senate Republican Whip John Thune plans to push for a vote on the U.S. cryptocurrency market structure bill, the Clarity Act, in September boosted investor sentiment. Expectations of easing regulatory uncertainty, combined with institutional buying, strengthened the overall market's upward foundation.

In the derivatives market, the average funding rate surged by 284% in 24 hours. This indicates that the upward trend was not solely driven by spot demand but was amplified by leveraged investors, who had bet on price declines, being forced to close their positions through mandatory buying. While regulatory expectations acted as a mid-to-long-term positive factor, a sharp short squeeze accelerated the short-term upward momentum.

The short-term watershed is the 23.6% Fibonacci resistance level formed at $2.23 trillion in total market capitalization. If net inflows into Bitcoin spot ETFs continue and this level is decisively breached, the market cap could rise to $2.26 trillion. Conversely, if it fails to hold above $2.23 trillion and even breaks below the 7-day Simple Moving Average (SMA) of $2.18 trillion, this rebound could be assessed as a temporary short squeeze rather than a trend reversal.

The market outlook leans towards cautious bullishness. While substantial institutional buying has supported prices, and regulatory progress coupled with technical buying has amplified the rise, the possibility of profit-taking near key resistance levels remains. The future direction depends on whether ETF net inflows continue and if the market can convert $2.23 trillion into a support level, with the September Clarity Act vote identified as the next major variable.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*