Amid recent volatility in cryptocurrency markets, investors are closely watching key indicators to determine whether the broader market is stabilizing—or if further downside risk remains. A critical question emerging in August 2025 is whether the current price action represents the formation of a "second foot," a potential final test of market lows before a sustained recovery. This analysis dives into spot ETF flows, U.S. dollar liquidity trends, and investor sentiment to assess the near-term outlook for Bitcoin (BTC) and Ethereum (ETH).
Spot ETF Flow Trends: Diverging Paths for BTC and ETH
One of the most telling signs of institutional and retail sentiment lies in the net inflows and outflows of spot ETFs. These instruments reflect real-time capital movement and can signal shifts in market confidence.
Bitcoin Spot ETFs: Volatile Outflows Signal Caution
On August 5, 2025, Bitcoin spot ETFs experienced a significant net outflow, coinciding with a broad market sell-off. This withdrawal suggested heightened risk aversion among institutional investors. However, as market sentiment stabilized over the following days, outflows slowed—and on August 7 and 8, some funds even recorded net inflows, indicating renewed interest or short-term accumulation.
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Yet optimism was short-lived. August 9 saw another spike in outflows, reinforcing the idea that investor confidence remains fragile. While not yet at panic levels, the inconsistent flow pattern points to a market in transition—one that is neither decisively bearish nor confidently bullish. This oscillation supports the hypothesis of a potential second bottom forming, as weak hands exit and stronger positions build.
Ethereum Spot ETFs: Early Strength Followed by Renewed Selling Pressure
Ethereum’s spot ETFs told a different story initially. On August 5 and 6, ETH-based funds saw net inflows, suggesting that some investors viewed the dip as a buying opportunity. This divergence from BTC could indicate growing interest in Ethereum’s ecosystem, particularly with expectations around future protocol upgrades and layer-2 adoption.
However, from August 7 through 9, the tide turned. ETH spot ETFs shifted into net outflow territory, mirroring BTC’s pattern and signaling renewed bearish sentiment. Notably, ETHE, one of the primary Ethereum trust vehicles, saw a sharp increase in outflows on August 9 after a period of declining outflows since July 23. This sudden reversal suggests lingering selling pressure—possibly from long-term holders or institutions rebalancing portfolios.
Until ETH ETF flows stabilize and return to consistent inflows, the asset may struggle to break out of its current range. A sustained recovery will likely depend on both macro conditions and positive developments within the Ethereum network.
U.S. Dollar Liquidity: The Fed’s Hidden Lever
Beyond crypto-specific metrics, broader financial conditions—especially U.S. dollar liquidity—play a crucial role in risk asset performance. Two key indicators offer insight: the Treasury General Account (TGA) and the Overnight Reverse Repurchase Agreement (ONRRP) facility.
Treasury General Account (TGA): Tightening Ahead of Target
Since August 2, the balance in the U.S. Treasury’s General Account has been rising. As of early August 2025, it stands at approximately $790 billion. The Department of the Treasury previously indicated its intention to maintain a cash balance of $850 billion by the end of September—leaving about $60 billion to be absorbed over the coming weeks.
A growing TGA balance means the government is withdrawing cash from the financial system, effectively reducing dollar liquidity. This tightening can pressure risk assets like cryptocurrencies, as less capital circulates in markets.
However, this squeeze is expected to be temporary. Officials have also stated that by year-end, the TGA balance will decline to $700 billion. That implies starting in October, funds will begin flowing back into the system—potentially boosting liquidity and supporting asset prices.
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ONRRP: A Short-Term Reversal Amid Long-Term Easing
The Federal Reserve’s ONRRP facility acts as a temporary parking spot for excess liquidity. When ONRRP volumes fall, it typically means money is moving into higher-yielding investments—often a bullish sign for equities and crypto.
From mid-July through early August, ONRRP usage had been steadily declining, signaling improving financial conditions. But since August 7, there has been a slight uptick in ONRRP volumes—now around $300 billion—suggesting some cash is returning to this safe harbor.
While this reversal could point to short-term risk-off behavior, the overall trend remains downward. The Fed continues to reduce liquidity absorption gradually, and with $300 billion still available for reinjection into markets, there’s room for monetary easing later in the year.
Frequently Asked Questions
Q: What does a “second foot” mean in market analysis?
A: A “second foot” refers to a price pattern where an asset retests previous lows after an initial drop and partial recovery. It often signals a final capitulation before a sustained upward move, forming a double-bottom-like structure.
Q: Why are ETF outflows concerning for crypto prices?
A: Persistent outflows suggest that institutional investors are exiting positions, which can increase selling pressure and dampen market sentiment. Sudden or large outflows often precede or confirm downtrends.
Q: How does U.S. dollar liquidity affect cryptocurrency markets?
A: When dollar liquidity is abundant, investors are more willing to take risks—often channeling funds into speculative assets like crypto. Conversely, tightening liquidity tends to suppress valuations across risk markets.
Q: Can Ethereum recover if ETF outflows continue?
A: Sustained outflows make recovery difficult in the short term. However, if on-chain fundamentals strengthen—such as increased usage of DeFi or NFT platforms—ETH could regain investor interest despite negative fund flows.
Q: When might dollar liquidity improve for crypto markets?
A: Starting in October 2025, as the TGA balance begins to decline and ONRRP usage remains low, more dollars are expected to flow back into financial markets. This shift could create favorable conditions for crypto appreciation.
Final Outlook: Proceed with Measured Caution
The current market environment reflects uncertainty rather than clear direction. While BTC and ETH showed brief signs of stabilization after the August 5 sell-off, renewed ETF outflows indicate that confidence has not fully returned. At the same time, U.S. dollar liquidity is undergoing a temporary contraction due to rising TGA balances and a minor rebound in ONRRP usage.
These factors suggest that near-term pressure may persist. However, the broader macro backdrop—particularly the anticipated increase in liquidity from October onward—provides reason for cautious optimism.
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For investors, this moment calls for discipline. Attempting to catch a falling knife carries significant risk; instead, focusing on long-term fundamentals and waiting for clearer signals—such as sustained ETF inflows and improving liquidity metrics—may yield better results.
In summary: a second bottom is possible, but confirmation is still pending. Watch ETF flows, TGA trends, and ONRRP data closely over the coming weeks to identify the next major directional move.
The views expressed here are for informational purposes only and do not constitute financial advice or endorsement by OKX. Always conduct your own research (DYOR) before making investment decisions.