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.
four straight weeks of outflows and EIP-1559 about to go live. the timing was actually perfect for ETH bulls
ETH from 2.5k to 4.8k post London upgrade. the fee burn mechanism was the catalyst everyone underestimated
EIP-1559 was the real catalyst. the fee burn turned ETH deflationary during a bear market. nobody saw that coming
hashwallet_ everyone says EIP-1559 was the catalyst but the fee burn during a bear market was negligible. ETH went to 4.8k because of the merge narrative, not London
deflation_skeptic the burn was small pre-merge but it set the narrative. ETH pumped to 4.8k because traders front-ran the deflation story, not because of actual supply reduction
BTC stuck at $39.2k while ETH was about to get EIP-1559. the fee burn mechanism made ETH deflationary and nobody priced it in
egraber_ ETH from $2.5k to $4.8k in three months after 1559. meanwhile BTC barely held $40k. the rotation was obvious
btc stuck under 40k while eth was about to get a deflationary mechanism. wonder who won that trade
satoshi_jr the ETH/BTC ratio trade around London was the easiest rotation of the cycle. BTC stuck under resistance while ETH was about to get deflationary. some people saw it coming
ETH went from 2.5k to 4.8k in three months after London. BTC barely moved. the rotation was obvious in hindsight
institutional money leaving crypto products for a month straight and retail was still bullish. classic
four straight weeks of outflows and retail was still buying the dip at 39k. that same crowd got annihilated when we crashed to 29k in September. institutional money was right to leave
Gemma V. retail bought 39k and got dumped on. institutional outflows were the tell and nobody listened because ETF hype was too loud
held through worse than 40k. this was nothing compared to the 2018 grind down to 3k
holding through 40k was easy compared to watching it crash to 29k a month later. that was the real test
Risto T. holding through 40k was mentally easy compared to watching it cascade to 29k. the real test was september not august
everyone focused on BTC stalling at 40k but EIP-1559 was the actual catalyst. fee burn alone changed ETH supply dynamics within weeks of that upgrade
4 weeks of outflows at 39k and the bottom was 29k a month later. Gemma V was right, institutional money saw it coming
fourth straight week of outflows and then EIP-1559 shipped. classic contrarian setup. anyone who bought ETH during the fear made 3x by November
institutions pulling money for 4 straight weeks right before EIP-1559. you literally cannot make this up. they sold the catalyst
fee_burn_kep_ exactly. anyone who tracked gas usage knew ETH was about to become deflationary. the outflow data was the ultimate contrarian signal
four straight weeks of outflows right before EIP-1559 launched. institutions literally sold the biggest ETH catalyst of 2021 at the bottom
BTC stuck under 40k while ETH was about to get its fee burn. anyone with half a brain knew where the momentum was going
BTC dominance at 46pct and dropping. that was the hidden tell. capital was already rotating to ETH before the upgrade even shipped