Crypto markets trade muted, lag risk rally

Bitcoin, Ether flat as stocks print records

Whilst hopes for a US-Iran agreement to revive the Strait of Hormuz and renewed AI-trade optimism lifted US equities to all-time highs, major cryptocurrencies remained largely sidelined on Wednesday. Bitcoin and Ether hovered near $64,000 and $1,800, respectively, extending their recent period of consolidation rather than participating in a broader risk rally they would normally follow.

This is becoming a familiar theme in 2026, with the divergence between cryptocurrencies and traditional risk assets, becoming increasingly pronounced since the start of the Iran conflict in late February. Unlike previous market cycles, bitcoin has failed to mirror gains in US equities while also attracting only limited safe-haven demand.

The accompanying correlation matrix highlights this shift, with bitcoin showing little relationship with either the US100 (-0.04) or the US500 (-0.16) over the past six months. By contrast, bitcoin has exhibited a moderately positive correlation with gold (+0.64), suggesting that geopolitical uncertainty and crypto-specific factors have exerted a greater influence on price action than broader risk sentiment. Meanwhile, the tailwinds driving other risk assets, including cheaper oil and easing rate expectations, have done little to boost cryptocurrencies.

Should a formal Hormuz agreement materialise, the market's response could prove telling. If crypto fails to rally on a confirmed deal after largely ignoring the prospect of one, it may signal that investor demand remains focused elsewhere.

Crypto headwinds weigh

For now, market-specific drivers, including muted ETF flows, regulatory uncertainty and ongoing security concerns, appear to be shaping sentiment more than macro developments.

Regulatory clarity remains elusive, with progress on the key market-structure bill, the CLARITY Act, stalled in the Senate as lawmakers debate ethics provisions linked to President Trump's crypto interests. Fresh calls for a SEC investigation into the $TRUMP memecoin have further highlighted the political hurdles facing market-structure reform, undermining expectations that the bill can pass before the August recess, as the market had hoped, and raising doubts about whether it will become law at all in 2026.

Sentiment has also been dented by the ongoing Coldcard wallet exploit, which has resulted in more than 1,755 BTC (around $110 million) being drained from thousands of wallets, reigniting security concerns across the crypto ecosystem.

At the same time, Strategy's continued bitcoin sales as part of its balance-sheet overhaul, including a further $105 million disposal of bitcoin alongside $291 million of common stock issuance, have added modest supply pressure to an already sluggish market, despite representing only a small fraction of its roughly $56 billion bitcoin holdings.

Thus, without a meaningful improvement in regulatory clarity or institutional demand, bitcoin may remain rangebound and end the year closer to its yearly lows than fresh highs, despite a broadly supportive backdrop for other risk assets.

ETF inflows steadied in July, August weakness expected

That said, July was a constructive month for crypto, with both major cryptocurrencies snapping a two-month losing streak. Bitcoin rose 7.2% during the month, while Ether gained 18.2%.

Meanwhile, the sharp ETF outflows seen in June eased considerably. After roughly $4.6 billion exited bitcoin ETFs in June, July recorded net inflows of around $172 million, breaking a three-month streak of negative flows. The return of capital, though modest, likely helped Bitcoin move towards the upper end of its trading range by month-end and into the start of August.

Bitcoin near range highs, capped by key resistance

However, slower institutional participation, reduced market liquidity and seasonal August weakness could continue to keep bitcoin trapped within its fresh $62,000-$66,500 tight range.

Still, a recovery in ETF demand could strengthen the case for a rebound. A break above the range ceiling, which has held since early June, would be needed to revive bullish momentum and bring the 200-day SMA near 70,000 into focus.

For now, the RSI remains near neutral, supporting the view that consolidation is likely to persist. Downside risks also appear relatively contained, with support holding around the 60,000 area.