Bitcoin Holds Below $40K as Crypto Funds See Fourth Straight Week of Outflows Ahead of Ethereum London Upgrade

Bitcoin started August 2021 on uncertain footing, trading around $39,200 and failing to reclaim the psychologically important $40,000 level. The tepid price action came as institutional investors continued pulling money out of crypto investment products for the fourth consecutive week, according to CoinShares data released on August 2. Meanwhile, the crypto community was counting down to one of the most significant upgrades in Ethereum’s history.

TL;DR

• Bitcoin traded at approximately $39,200 on August 2, 2021, struggling to break above $40,000
• Crypto investment products recorded their fourth straight week of outflows per CoinShares data
• Ethereum was gearing up for the London hard fork and EIP-1559, scheduled for activation on August 5
• EIP-1559 would introduce an automated gas fee system and begin burning a portion of transaction fees
• The total crypto market cap stood at approximately $1.6 trillion with BTC dominance near 46%

Bitcoin Stalls Below Key Resistance

After a bruising couple of months that saw Bitcoin plummet from its April 2021 all-time high near $64,000, the largest cryptocurrency by market capitalization was finding it difficult to mount a convincing recovery. Trading around $39,200 on August 2, BTC remained in a consolidation pattern that had persisted through much of July, with the $40,000 level serving as persistent resistance.

The selling pressure from institutional channels was notable. CoinShares, one of the most widely cited trackers of crypto fund flows, reported that digital asset investment products experienced net outflows for the fourth week in a row. This sustained period of institutional withdrawal reflected lingering caution in the wake of China’s crackdown on mining and increased regulatory scrutiny across multiple jurisdictions.

The macroeconomic backdrop offered mixed signals for Bitcoin bulls. On one hand, ongoing discussions about inflation in the United States and loose monetary policy from the Federal Reserve theoretically supported the case for Bitcoin as an inflation hedge. On the other, the broader risk-off sentiment that had crept into markets during the summer months was dampening appetite for volatile assets.

Ethereum’s London Upgrade Looms Large

While Bitcoin prices stagnated, the Ethereum community was electrified by the imminent arrival of the London hard fork. Scheduled for activation on August 5, the upgrade was headlined by EIP-1559 — a proposal co-authored by Eric Conner that would fundamentally reshape how users pay for transactions on the Ethereum network.

Under the existing system, Ethereum users had to effectively bid for block space, manually setting gas prices in a process that could be confusing for newcomers and expensive during periods of congestion. EIP-1559 introduced an automated bidding system with a set base fee that fluctuated based on network demand, making transaction costs more predictable.

Perhaps more significantly for investors, EIP-1559 included a mechanism to burn a portion of every transaction fee, permanently removing those tokens from circulation. Meltem Demirors, chief strategy officer at CoinShares, described EIP-1559 as “one of the most significant upgrades to Ethereum since the network’s launch,” underscoring its importance to the broader crypto ecosystem.

Ethereum was trading around $2,610 on August 2, buoyed in part by anticipation of the London upgrade and the potential for reduced ETH supply.

Institutional Caution Persists

The CoinShares flow data painted a picture of institutional investors sitting on their hands. Four consecutive weeks of outflows from crypto investment products suggested that the confidence that had driven billions into Bitcoin ETFs and trust products earlier in 2021 had been shaken by the events of May and June.

China’s ban on mining and trading had been the most dramatic catalyst for the shift in sentiment. The resulting hashrate collapse and subsequent migration of mining operations to the United States, Kazakhstan, and other countries introduced uncertainty that institutional investors found difficult to price in. Regulatory developments in the US were also contributing to the cautious tone, with ongoing debates about crypto taxation provisions in infrastructure legislation.

Despite the outflows, some analysts noted that the pace of withdrawals was decelerating, suggesting that the worst of the institutional exodus might be over. The question was whether a catalyst — perhaps a successful Ethereum upgrade, or a decisive break above $40,000 — would be enough to reverse the trend.

What Traders Were Watching

Beyond the London upgrade, crypto traders were monitoring several key factors heading deeper into August. Bitcoin’s ability to reclaim and hold above $40,000 was seen as a critical technical milestone that could determine the direction for the broader market. The ongoing difficulty adjustment on the Bitcoin network, which was still calibrating to the post-China mining landscape, was also influencing miner economics and selling pressure.

On the Ethereum side, the successful deployment of EIP-1559 without any technical issues was the primary near-term event. Longer-term, the upgrade was seen as a stepping stone toward Ethereum’s transition from proof-of-work to proof-of-stake — a migration that had been in the works for years and was expected to dramatically reduce the network’s energy consumption.

Why This Matters

August 2, 2021, captured a pivotal moment in crypto markets. Bitcoin was stuck in a holding pattern below $40,000, institutional money was flowing out, and the industry was about to undergo one of its most significant technical upgrades. The London hard fork would go on to burn billions of dollars worth of ETH, fundamentally altering Ethereum’s tokenomics and setting the stage for the network’s eventual transition to proof-of-stake. For investors, the period was a reminder that crypto markets are shaped not just by price charts, but by protocol-level changes, regulatory shifts, and the ongoing tug-of-war between innovation and institutional caution.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research before making investment decisions.