Bitcoin Consolidation: A Shift in Liquidity Towards Ethereum and Altcoins
The cryptocurrency market has witnessed a significant shift in liquidity, with Bitcoin (BTC) consolidating and investors increasingly turning to Ethereum and other altcoins. According to a report by Bitfinex Alphas on August 25th, this rotation is a measured response to Bitcoin’s all-time high formation, with institutional liquidity flowing towards Ethereum and broader altcoin markets.
The report highlights that Bitcoin’s weekly open from August 18 to August 22 saw a 4.5% decline, with the asset slipping to a local low as investors became risk-averse ahead of the Jackson Hole Symposium of the Federal Reserve. The US Spot Exchange Fund (ETFS) flows also recorded net drains of $1.18 billion during the week, with Bitcoin ETFs losing $111,990 and eventually breaking below the $110,000 threshold to trade at $109,795.71.
Market Response to Jackson Hole Symposium
The chairman of the Federal Reserve, Jerome Powell, triggered a sharp response in risk assets at Jackson Hole, leading to a broad-based short squeeze in the crypto market. Ethereum, in particular, led the recovery, reaching a new all-time high of $4,958.70 on August 24 and demonstrating its role as a liquidity driver for institutional markets. On August 18, Spot ETFs recorded $197 million in drains, marking the third largest daily exit, but Ethereum Treasury companies absorbed considerable sales pressure, with preliminary estimates indicating sensible institutional support.
Corporate treasuries, including Sharplink gaming, bitmine energy technologies, and BTCs, accelerated accumulation, with treasury credits exceeding $10 billion. The report notes that the rotation after August 14th, with $123,640, reflects softer capital inflows into Bitcoin. The realized upper limit of Bitcoin changed by 6% per month during the current step, compared to a monthly growth of 13% during the outbreaks of late 2024 over $100,000, indicating a more cautious investor appetite.
Macro Signals and Market Trends
Global liquidity conditions remain supportive, with the combined M2 money volume of large central banks approaching $100 trillion. The structural upward trend in global liquidity increases the long-term bullish case for digital assets, although capital allocation has become more selective. Solana, for example, rose above $200 to reach $212.60, as the broader digital wealth class pushed higher, along with stocks, reflecting the tightening of correlations between crypto and traditional risk assets. Meanwhile, network development continues, as evidenced by DBS Bank’s recent tokenized grade in Ethereum.
In this context, Bitfinex expects Bitcoin to consolidate, while Ethereum attracts increased institutional demand, reflecting Bitcoin’s dynamics from the beginning of 2024. The report anticipates significant capital rotation into older coins with higher risk in the cycle, with a more comprehensive re-evaluation of renewed Bitcoin ETF inflows and new Altcoin investment vehicles. For more information, visit https://cryptoslate.com/bitcoin-consolidates-as-liquidity-flows-shift-to-ethereum-and-broader-altcoin-markets/
