BIT Research: No more buying ETFs, strategies are also slowing down, what else can Bitcoin rely on to rise?

The current market is in a macro repricing phase dominated by inflation and interest rate expectations. Over the past decade, Bitcoin has benefited from an environment of loose liquidity and low inflation, with its narrative of "hedging against currency dilution" continuously strengthening. However, as institutional funds continue to flow in, the pricing logic of Bitcoin is changing, increasingly relying on interest rate expectations and capital flows.

From the current market performance, Bitcoin's recent weakness is not due to a deterioration in its fundamentals, but rather the two core driving forces behind this bull market are weakening. On one hand, market expectations for interest rate cuts have been continuously revised downwards; on the other hand, the incremental funds brought by Bitcoin ETFs and Strategy (formerly MicroStrategy) are beginning to slow down. Against this backdrop, the pressure on Bitcoin is rising, and its subsequent trend will still depend on changes in inflation and the Federal Reserve's policy path.

Inflation Reheating: Interest Rate Expectations Become Bitcoin's Biggest Constraint

Post-pandemic fiscal stimulus has changed the monetary transmission mechanism, with funds not only pushing up asset prices but also entering the real economy, significantly driving up inflation about 18 months later. In June 2022, the U.S. CPI peaked at 9.1%; subsequently, inflation continued to decline, dropping to 2.4% by September 2024, which continuously reinforced expectations for interest rate cuts, providing important support for Bitcoin's rise.

However, this logic began to change at the end of 2024. As the market worried about inflation rising again, expectations for interest rate cuts continued to decline. The market's expectations for rate cuts in 2025 were revised down from about six cuts priced in September 2024 to nearly zero by January 2025; although it briefly recovered to about 2.6 cuts, when the CPI returned to around 3%, the market turned cautious again. The CPI data released on May 12, 2026, recorded 3.8%, and the market even began to reprice about 1.8 rate hikes.

For stocks, higher inflation may still be partially absorbed through nominal income and profit growth; however, Bitcoin lacks cash flow and profit support, making it more sensitive to changes in interest rate expectations. When the market re-accounts for a higher interest rate path, Bitcoin often bears the brunt of the pressure.

ETF and Institutional Fund Slowdown: Both Engines of the Bull Market Cooling Simultaneously

In this cycle, Bitcoin ETFs are one of the most important sources of incremental funds. Since the expectation of ETF approval heated up in 2023, institutional funds have become the core force driving the market upward. However, as the Federal Reserve's policy stance turned hawkish, capital inflows have noticeably slowed. Entering 2026, Bitcoin ETFs have seen continuous net outflows, and investors' willingness to increase holdings has significantly declined.

Especially after the CPI data was released on May 12, 2026, ETF fund outflows intensified, with a cumulative outflow of about $4.3 billion. In the following 15 trading days, there were net sales recorded on 14 of those days, indicating that institutional funds remain cautious in a high-inflation environment. Meanwhile, Strategy and Bitcoin ETFs have cumulatively allocated about $110 billion in Bitcoin, but as the space for Strategy to increase its holdings gradually narrows, its role as the second-largest funding engine has also begun to weaken.

With ETF fund inflows stagnating, institutional allocation willingness declining, and Strategy's momentum for increasing holdings slowing, both core driving forces supporting this bull market are showing signs of cooling, making Bitcoin's rebound face greater resistance.

Overall, the main challenges Bitcoin currently faces do not stem from within the industry but from changes in the macro environment. The loose liquidity and expectations for interest rate cuts that previously supported the market's rise are weakening, and institutional funds are also cautious about high inflation and higher interest rates. In the short term, as long as inflation remains high, Bitcoin is likely to continue to maintain a volatile consolidation. However, from a historical cycle perspective, inflation will eventually peak. Once inflation falls and expectations for interest rate cuts are restored, institutional funds are expected to flow back in, and Bitcoin may usher in a new round of stronger recovery.

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Disclaimer: The market has risks, and investment should be cautious. This article does not constitute investment advice. Trading in digital assets may carry significant risks and volatility. Investment decisions should be made after careful consideration of personal circumstances and consulting financial professionals. BIT is not responsible for any investment decisions made based on the information provided in this content.