Stock futures climb as oil prices pull back, Bitcoin jumps amid strong ETF inflows

Market Overview: Stocks and Oil

On Friday, stock futures edged upward, with the S&P 500 climbing 0.38% to reach 6,698 points. This modest gain followed a steep decline earlier in the week, as oil prices soared more than 15% to surpass $104, putting pressure on the equity markets. The subsequent rebound was largely a reaction to oil prices dropping below $100, rather than a shift in investor sentiment toward risk.

The turnaround was sparked by a U.S. decision to temporarily lift sanctions on Russian oil stranded at sea. This move was intended to boost supply during ongoing disruptions in the Strait of Hormuz. As a result, oil prices fell, with Brent crude slipping to $99.24 and WTI dropping to $93.73 on Friday morning.

The market's response underscored that the rally was defensive in nature. Earlier, the surge in oil prices had triggered a sharp sell-off, causing the Dow Jones Industrial Average to experience its largest weekly decline in nearly a year. This downturn weighed on credit-sensitive stocks and pushed the 10-year Treasury yield up to 4.18%, raising concerns about stagflation. The quick recovery highlighted how sensitive markets are to changes in energy prices.

Bitcoin's Flow-Driven Surge

Bitcoin broke above $72,000 on Wednesday, propelled by a significant influx of funds. The main driver was a $155 million net inflow into U.S. spot bitcoin ETFs, marking a two-week streak that totaled about $1.47 billion in new investments. This wave of institutional buying provided the momentum needed to lift bitcoin after a period of sluggish trading, setting it apart from the oil-related relief seen in equities.

The inflow itself was a response to easing geopolitical tensions, similar to the factors that cooled oil prices. As President Trump indicated a possible resolution to the U.S.-Israel conflict with Iran, risk assets rallied across the board. Bitcoin's jump was the most pronounced, with the cryptocurrency surpassing $70,000 and triggering $186 million in short liquidations within 24 hours. This was a forced short squeeze, not a fundamental change in crypto risk appetite.

Despite the rally, demand remains fragile. On-chain metrics reveal weakening buying momentum, with only around 57% of bitcoin supply currently profitable—a level historically associated with the early stages of bear markets. While ETF flows have stabilized and some investors view bitcoin as a round-the-clock geopolitical hedge, technical analysis suggests limited liquidity above current prices and significant short positions below. The rally is driven by flows, but downward pressure may soon test lower price levels.

Understanding the Divergence: Flow Dynamics

Bitcoin's initial rise during the oil shock was a textbook short squeeze, not a fundamental shift in market sentiment. Negative funding rates built up during the prior sell-off, and as leverage was cleared out, a mechanical buying surge followed, resulting in a sharp price increase. This movement was primarily about unwinding crowded short positions rather than a change in risk appetite.

While gold acted as a traditional safe haven and rallied, Bitcoin initially moved in tandem with equities, reflecting its ongoing correlation with broader risk assets. However, the subsequent rally has become decoupled, fueled by institutional ETF inflows. Over the past two weeks, spot bitcoin ETFs have attracted roughly $1.47 billion in new allocations, providing sustained buying pressure after a period of consolidation.

This flow-driven rally faces resistance near $70,000. On-chain data indicates that only about 57% of bitcoin supply is in profit, a threshold historically linked to the onset of bear markets. This suggests that a significant portion of supply is held close to current prices, creating a potential area where holders may sell to take profits. Any further upward movement could be limited until fresh demand emerges.