Key Takeaways
- • Digital asset funds have attracted approximately $11.1 billion since mid-July, but weekly inflows slowed in the week of the report, according to CoinShares.
- • The 10-year U.S. Treasury yield has climbed above 5.3% and the 30-year yield has reached 5.7%, both near their highest levels in more than two decades.
- • October rate-hike odds fell to 23% from 71% three weeks earlier, shifting market attention away from Federal Reserve policy.
- • CoinShares argues that U.S. fiscal sustainability concerns could influence Bitcoin more than Fed policy, and that sustained fund inflows would show whether those concerns strengthen Bitcoin demand.
Summary
CoinShares says the connection between Bitcoin and the government bond market could become more important as inflows into digital asset investment products lose momentum. Those funds have attracted approximately $11.1 billion since mid-July, but demand weakened during the week of the report. The slowdown comes as U.S. Treasury yields continue to climb. The 10-year yield has risen above 5.3%, while the 30-year yield has reached 5.7%, both near their highest levels in more than two decades.
Rising yields have persisted despite efforts by the U.S. Treasury Department to support the market. The department doubled its long-term liquidity-support buybacks in August, to at least $4 billion per operation. Those measures remain in place through early November, but yields have kept rising. According to the report, this suggests investors remain concerned about the government's underlying fiscal position. Treasury Secretary Scott Bessent has acknowledged that the Treasury cannot simply control the bond market and has pointed to higher oil prices as a factor behind the increase in yields.
September was the worst month for U.S. government bonds in four years, with the 10-year Treasury yield rising by more than 50 basis points. Increases of that size typically pressure Bitcoin by making traditional fixed-income investments more attractive relative to non-yielding assets. CoinShares points to a different possibility: that concerns about fiscal sustainability could eventually drive demand for Bitcoin more than Federal Reserve policy does. Market expectations for Fed action have also shifted, with October rate-hike odds falling to 23% from 71% three weeks earlier.
Whether this thesis holds will depend on whether digital asset fund inflows regain momentum. According to CoinShares, sustained inflows would indicate whether fiscal concerns are translating into stronger Bitcoin demand. For institutional allocators, the report frames the bond market, rather than the Fed, as the more important macro variable to monitor for Bitcoin exposure.
Rising yields have persisted despite efforts by the U.S. Treasury Department to support the market. The department doubled its long-term liquidity-support buybacks in August, to at least $4 billion per operation. Those measures remain in place through early November, but yields have kept rising. According to the report, this suggests investors remain concerned about the government's underlying fiscal position. Treasury Secretary Scott Bessent has acknowledged that the Treasury cannot simply control the bond market and has pointed to higher oil prices as a factor behind the increase in yields.
September was the worst month for U.S. government bonds in four years, with the 10-year Treasury yield rising by more than 50 basis points. Increases of that size typically pressure Bitcoin by making traditional fixed-income investments more attractive relative to non-yielding assets. CoinShares points to a different possibility: that concerns about fiscal sustainability could eventually drive demand for Bitcoin more than Federal Reserve policy does. Market expectations for Fed action have also shifted, with October rate-hike odds falling to 23% from 71% three weeks earlier.
Whether this thesis holds will depend on whether digital asset fund inflows regain momentum. According to CoinShares, sustained inflows would indicate whether fiscal concerns are translating into stronger Bitcoin demand. For institutional allocators, the report frames the bond market, rather than the Fed, as the more important macro variable to monitor for Bitcoin exposure.
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