Recent investment flows exhibited contrasting trends among major crypto-based ETFs. Bitcoin ETFs experienced an outflow of approximately $58.5 million over the past four trading sessions, whereas Ethereum ETFs attracted substantial institutional investment totaling $1.393 billion, highlighting differing investor sentiment between the two leading assets.

Regulatory Clarity Boosts Stablecoin Market Interest

A key positive catalyst came from recent regulatory developments in the United States. Last week, the U.S. House of Representatives discussed several critical bills affecting the digital asset landscape, most notably the Guidelines for National Innovation of Stablecoins (GENIUS) Act, Crypto Legislation and Regulatory Transparency (CLARITY) Act, and the CBDC Oversight Act. Importantly, GENIUS was approved and signed into law by President Donald Trump, mandating stablecoin issuers to back their tokens with U.S. dollars or equivalent cash instruments at a strict 1:1 ratio. This new regulation also requires issuers to publicly disclose reserve compositions and undergo mandatory external audits.

This clear regulatory framework significantly boosted investor confidence in stablecoins, attracting institutional funds amounting to $4.0 billion over the past seven days, pushing total stablecoin market capitalization to $264 billion. However, looming trade tensions continued pressuring the U.S. dollar as market participants turned to digital currencies as safe-haven assets in anticipation of increased import tariffs announced by the White House, set to take effect on August 1.

Midweek Market Correction Amid Profit-Taking and Trade Deals

Nevertheless, by midweek, crypto markets underwent a correction phase driven by profit-taking behaviors and evolving geopolitical developments. A significant turning point was President Trump's announcement of a comprehensive trade agreement with Japan, imposing 15% tariffs on Japanese imports and securing $550 billion directed into the U.S. economy. Additionally, prospects of reaching a similar accord with the European Union, a crucial trade partner, further cooled market uncertainty and temporarily diminished demand for cryptocurrencies as hedges.

XRP notably underperformed, declining sharply by 12.2%, primarily attributed to substantial profit-taking after last week's bullish rally. Previously, optimism surrounding XRP surged as the New York Stock Exchange (NYSE) launched ProShares Ultra XRP ETF (#UXRP), an investment vehicle offering leveraged exposure (2x) to XRP futures. On its debut, UXRP recorded impressive trading volumes of $15 million, initially propelling XRP to an all-time high of around $3.6620 before retreating amid correction pressures.

Investor Sentiment Remains Optimistic Despite Short-Term Decline

Despite recent price corrections, market sentiment, particularly among institutional traders, remains optimistic. The introduction of transparent and robust regulatory frameworks diminishes previous concerns about potential governmental sanctions, providing a stable environment conducive to increased investments in digital assets. The Crypto Fear & Greed Index remains notably elevated at a "Greed" rating of 70, indicating strong investor confidence and suggesting that the current market downturn may be short-lived, potentially paving the way for renewed growth momentum in the near term.