Bitcoin hovers near $65,000 as FOMC meet, ETF outflows weigh

Bitcoin is trading near the $65,000 level on Monday, as the cryptocurrency market braces for the Federal Reserve's two-day policy meeting starting Tuesday. The world's largest digital asset has been range-bound in recent sessions, with investors weighing a mix of headwinds including sustained outflows from spot Bitcoin exchange-traded funds (ETFs) and fresh geopolitical tensions.

Data from crypto exchanges shows Bitcoin changing hands at around $64,800 in early Asian trade, down about 2% from the weekend highs. The price action comes as the market waits for the Federal Open Market Committee (FOMC) decision on interest rates, expected on Wednesday.

ETF outflows continue to pressure sentiment

Spot Bitcoin ETFs in the United States have recorded net outflows for the fourth consecutive week, according to data from market trackers. The trend signals that institutional investors are pulling back from the asset class amid uncertainty over the near-term direction of monetary policy.

Analysts say the outflows are partly driven by profit-taking after Bitcoin's strong rally in the first half of the year. The cumulative outflows from the 11 approved spot ETFs now exceed $1.2 billion over the past month, a figure that has not gone unnoticed by traders.

"We are seeing a classic de-risking move ahead of the FOMC," said a Mumbai-based crypto fund manager. "Institutions are reducing exposure until there is clarity on rates."

Geopolitical concerns add to the mix

Geopolitical risks are also weighing on risk assets, including cryptocurrencies. Reports of escalating tensions in Eastern Europe and the Middle East have kept investors on edge, prompting a flight to safe-haven assets like gold and the US dollar.

Bitcoin, often touted as a hedge against geopolitical turmoil, has not behaved like one in this cycle. The digital currency has largely moved in tandem with tech stocks, making it vulnerable to the same macro risks that are rattling equity markets.

"Bitcoin's correlation with the Nasdaq is still high," noted a report from a Singapore-based research firm. "Until that breaks, it will trade like a risk-on asset."

What the FOMC decision means for crypto

The Federal Reserve is widely expected to hold interest rates steady at the current range of 5.25% to 5.50%. However, the market will be parsing the Fed's statement and Chair Jerome Powell's press conference for any hints about rate cuts later this year.

Lower interest rates typically boost demand for speculative assets like Bitcoin, as they reduce the opportunity cost of holding non-yielding assets. A hawkish stance, on the other hand, could trigger further selling in the crypto market.

Traders are pricing in a 70% probability of a rate cut in September, according to the CME FedWatch Tool. But any deviation from that expectation could roil markets.

"The FOMC decision is the single biggest catalyst this week," said a Delhi-based analyst. "A dovish outcome could push Bitcoin back above $68,000, while a hawkish surprise might test support at $62,000."

For now, the market is in a wait-and-watch mode. Volumes have dipped across major exchanges, suggesting that large players are sitting on the sidelines until the Fed's verdict is out. The next few days will likely set the tone for Bitcoin's trajectory in August.