Institutional Investors Steer Capital to Ethereum Amid Bitcoin’s Dovish Dilemma

Bitcoin prices have fallen below the $113,000 mark, with recent trading activity reflecting a significant correction from the all-time high of $124,510.65 seen in mid-August 2025. The decline was driven by a combination of macroeconomic factors, including unexpectedly high US Producer Price Index (PPI) data and concerns over inflationary pressures, which raised the likelihood of a delayed Federal Reserve rate cut. The US PPI surged to an annual rate of 3.3%, surpassing forecasts and increasing market uncertainty about the trajectory of inflation and monetary policy.

The drop in Bitcoin’s price was exacerbated by the liquidation of leveraged long positions, with over $113 million in open positions being closed during the correction. This volatility coincided with broader market jitters, as seen in the Nasdaq 100 falling by 1.5% following research indicating weak AI-driven revenue growth for companies. Additionally, the SEC’s investigation into potential fraud at Alt5 Sigma, a firm linked to Donald Trump’s World Liberty Financial, added to the bearish sentiment.

Despite the short-term sell-off, the cryptocurrency market has shown resilience. Institutional investors have continued to accumulate Ethereum, with two major wallets receiving 9,044 ETH valued at approximately $38 million, signaling sustained confidence in the asset. Meanwhile, Ethereum’s on-chain DEX trading volume reached an all-time high of $140.1 billion in August 2025. The altcoin season index, currently in the 25–75 range, suggests a shift of capital toward major cryptocurrencies like Ethereum.

The broader macroeconomic environment has also played a role in Bitcoin’s volatility. Fed officials have increasingly signaled a dovish stance, with several members advocating for a rate cut in September 2025. Governor Waller, for instance, supported a 25-basis-point cut, while others noted that the current rate path would depend on incoming economic data. On the other hand, the European Central Bank has maintained a cautious approach, with some members indicating that inflation risks remain skewed to the downside but not warranting immediate rate cuts.

Market structure indicators suggest that Bitcoin could find support around the $112,000 level. A liquidity sweep and increased open interest at this level may act as a catalyst for a rebound, particularly if institutional demand reemerges. Additionally, the rise in Ethereum’s popularity—driven by stablecoin issuance and real-world asset tokenization—has further diversified the crypto market, reducing the dominance of Bitcoin relative to earlier periods.

Looking ahead, the Federal Reserve’s September meeting will remain a focal point for market participants. If the data supports a rate cut, it could provide a floor for Bitcoin and other risk assets. However, the risk of a deeper correction persists, especially if the labor market continues to weaken. With nearly a million jobs vanishing in recent months and the U.S. unemployment rate showing signs of increased pressure, the economic landscape remains uncertain. Investors are advised to maintain disciplined risk management strategies, including dynamic stop-loss levels and prudent position sizing, as the market continues to navigate a consolidation phase.