Bitcoin Enters the Second Half of the Year in a Bear Market as ETFs, the Fed, and Strategy Test the $100K Support Level

Bitcoin Faces Key Test in H2 as ETF Outflows, Fed Policy, and Regulation Weigh on Market

Bitcoin is entering the second half of 2026 under heavy pressure after losing much of the momentum that fueled its previous rally.

According to CryptoSlate data, Bitcoin has fallen around 33% this year and is down more than 50% from its all-time high above US$126,000 in October. At the time of writing, the world’s largest cryptocurrency is trading near US$58,600, its lowest level since September 2024.

The decline has pushed Bitcoin below several important long-term support levels, making the first half of 2026 its weakest start to a year since the crypto market crash in 2022.

July Could Decide Bitcoin’s Next Move

The coming weeks could determine whether Bitcoin begins to recover or extends its losses.

Investors are closely watching three major factors: the direction of spot Bitcoin ETF flows, the Federal Reserve’s next interest rate decision, and the progress of the CLARITY Act in the US Congress.

If market conditions improve, Bitcoin could recover toward US$100,000 by the end of the year. However, if selling pressure continues, analysts believe the price could fall toward the US$50,000–US$55,000 range, which is now viewed as the next major support area.

ETF Outflows Continue to Pressure Bitcoin

One of the biggest concerns is the continued withdrawal of money from US spot Bitcoin ETFs.

Data from SoSoValue shows these ETFs recorded around US$4.5 billion in net outflows during June, the largest monthly withdrawal since the products launched in January 2024.

Most of the outflows came from BlackRock’s IBIT, highlighting that institutional demand has weakened significantly.

Bitcoin ETFs recorded inflows on only three trading days throughout June, totaling less than US$100 million. On most other days, investors withdrew hundreds of millions of dollars from the funds.

The heavy selling pushed Bitcoin below US$60,000 and challenged the belief that ETFs would provide stable demand during market downturns.

Bitcoin research firm Ecoinometrics said the recent price decline matches the sustained selling seen in ETF flows.

According to the firm, nearly every trading day over the past month has seen investors pull money from spot Bitcoin ETFs, creating one of the longest periods of continuous outflows since the funds were introduced.

Although the withdrawals do not necessarily reflect panic selling, they suggest institutional investors remain cautious. Many investors may simply be taking profits after Bitcoin’s strong rally last year.

For now, ETF flows have become one of the market’s most important indicators of investor confidence. A return to steady inflows would signal renewed institutional interest, while continued outflows could leave Bitcoin increasingly dependent on long-term holders.

Hawkish Fed Reduces Support for Crypto

Bitcoin is also facing a more challenging macroeconomic environment.

At its June meeting, the Federal Reserve kept interest rates unchanged but adopted a more hawkish tone under Chair Kevin Warsh.

With inflation remaining above target and tariffs continuing to affect prices, markets are no longer expecting interest rate cuts as their base case. Instead, some investors are now considering the possibility of another rate hike later this year.

Higher interest rates generally reduce demand for assets like Bitcoin because they make interest-bearing investments such as US Treasuries more attractive.

The Fed’s latest stance has therefore removed one of the major bullish expectations that supported crypto markets earlier this year.

Strategy Signals More Flexible Bitcoin Approach

Another development attracting attention is Strategy’s changing approach to its Bitcoin holdings.

The company, formerly known as MicroStrategy, sold 32 BTC worth around US$2.5 million in May—its first Bitcoin sale in years.

Although the transaction represented only a tiny portion of its holdings, it raised questions because Strategy has long been viewed as one of Bitcoin’s strongest corporate supporters.

The company later said it could sell part of its Bitcoin holdings when necessary to strengthen its balance sheet, support financing activities, or repurchase shares.

Strategy still holds a massive Bitcoin reserve, but its willingness to sell if needed suggests corporate treasury companies may become more flexible rather than continuing to buy Bitcoin regardless of market conditions.

If more companies adopt a similar approach, corporate demand for Bitcoin could weaken during periods of market stress.

AI Is Attracting More Investment Than Crypto

Bitcoin is also competing with another fast-growing investment theme: artificial intelligence.

Over the past year, investors have poured money into AI-related companies, including chipmakers, software firms, cloud providers, and data center operators.

This shows that investors have not abandoned risk assets altogether. Instead, much of their capital is flowing into AI, where many companies offer clearer earnings growth and business opportunities.

As a result, Bitcoin has struggled to attract the same level of investor attention despite lower prices.

CLARITY Act Could Become Bitcoin’s Biggest Catalyst

Regulation may provide one of the few positive catalysts for Bitcoin in the near term.

The CLARITY Act aims to establish a clear regulatory framework for digital assets in the United States by defining the responsibilities of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

If approved, the legislation could provide greater legal certainty for crypto exchanges, banks, asset managers, and token issuers.

However, lawmakers have limited time before the August congressional recess, and several political issues still need to be resolved before the bill can advance.

A successful vote could improve market sentiment during the second half of the year, while further delays would leave the crypto industry facing ongoing regulatory uncertainty.

Thomas Perfumo, Chief Economist at Kraken, said the CLARITY Act is one of the most important developments to watch in July, as its approval could help restore investor confidence and improve market momentum.