Key Takeaways
- • CoinShares head of research James Butterfill argues the U.S. bond market, not the Federal Reserve, may be the decisive factor for bitcoin, with fiscal concerns shaping investor behavior.
- • Crypto funds have taken in $11.1 billion since mid-July, though inflows have slowed amid conflicting macro signals on employment, inflation and public finances.
- • The 10-year Treasury yield topped 5.3% and the 30-year reached 5.7%, the highest in more than two decades; September was the worst month for U.S. government bonds in four years according to CoinShares calculations.
- • Markets cut the probability of an October Fed rate hike to 23% from 71% three weeks earlier after weak September nonfarm payrolls, yet bitcoin did not sustain a rally.
- • Bitcoin fell from roughly $83,200 to $80,400 overnight on October 9 amid rate and oil pressures, with more than $1 billion in positions liquidated over 24 hours before recovering to about $83,350.
Summary
CoinShares head of research James Butterfill says the U.S. bond market may matter more for bitcoin than the Federal Reserve. According to his report, crypto funds have attracted $11.1 billion in inflows since mid-July, but the pace has slowed as market participants reconcile three conflicting signals: weakening employment, sticky inflation and a deteriorating outlook for U.S. public finances. Butterfill argues the lack of flow momentum reflects uncertainty rather than weaker fundamentals, and estimates investors were buying crypto assets at depressed prices during the period.
According to U.S. Treasury data cited in the report, the 10-year Treasury yield exceeded 5.3% and the 30-year reached 5.7%, the highest in more than two decades. CoinShares calculates that the 10-year yield rose more than 50 basis points in September, the worst month for U.S. government bonds in four years. Despite the Treasury doubling the size of its long-end buybacks to at least $4 billion per operation in August, yields kept rising; Butterfill said this underscored that investor concern about public finances was not eased by short-term support. Treasury Secretary Scott Bessent acknowledged the department cannot fully control the bond segment and cited higher oil prices as a key driver of rising yields.
The Fed has sent mixed signals, with some officials emphasizing high inflation and others highlighting labor market risks. September nonfarm payrolls came in well below expectations, and the probability of an October rate hike fell to 23% from 71% three weeks earlier. Minutes from the Fed meeting showed most officials nonetheless expected one more increase by year-end. Butterfill notes the broader economy has held up, with PMI indicating expansion and consumer spending not slumping, while energy prices remained elevated amid the conflict with Iran.
Butterfill views the bond market as the decisive factor. Rising yields typically pressure bitcoin by tightening financial conditions, but if the move reflects fiscal concerns rather than economic strength, bitcoin may behave more like an alternative to government money. He says the market has not yet determined which scenario is playing out and believes the current mix is enough for bitcoin to grind higher, with a sharper move possible if investors allocate to crypto on fiscal risk. He suggested monitoring fund flows in the coming weeks.
On October 9, bitcoin fell from about $83,200 to about $80,400 overnight as rate expectations and oil prices added pressure. WTI futures rose from $89 to $93.2 amid reports, cited by Axios, that the Pentagon was preparing for a possible resumption of hostilities in Iran. More than $1 billion in positions were liquidated over 24 hours, $862 million of them longs. The market recovered after Donald Trump said the United States would not attack Iran before the November 3 midterm elections, and bitcoin was trading near $83,350 at the time of writing.
According to U.S. Treasury data cited in the report, the 10-year Treasury yield exceeded 5.3% and the 30-year reached 5.7%, the highest in more than two decades. CoinShares calculates that the 10-year yield rose more than 50 basis points in September, the worst month for U.S. government bonds in four years. Despite the Treasury doubling the size of its long-end buybacks to at least $4 billion per operation in August, yields kept rising; Butterfill said this underscored that investor concern about public finances was not eased by short-term support. Treasury Secretary Scott Bessent acknowledged the department cannot fully control the bond segment and cited higher oil prices as a key driver of rising yields.
The Fed has sent mixed signals, with some officials emphasizing high inflation and others highlighting labor market risks. September nonfarm payrolls came in well below expectations, and the probability of an October rate hike fell to 23% from 71% three weeks earlier. Minutes from the Fed meeting showed most officials nonetheless expected one more increase by year-end. Butterfill notes the broader economy has held up, with PMI indicating expansion and consumer spending not slumping, while energy prices remained elevated amid the conflict with Iran.
Butterfill views the bond market as the decisive factor. Rising yields typically pressure bitcoin by tightening financial conditions, but if the move reflects fiscal concerns rather than economic strength, bitcoin may behave more like an alternative to government money. He says the market has not yet determined which scenario is playing out and believes the current mix is enough for bitcoin to grind higher, with a sharper move possible if investors allocate to crypto on fiscal risk. He suggested monitoring fund flows in the coming weeks.
On October 9, bitcoin fell from about $83,200 to about $80,400 overnight as rate expectations and oil prices added pressure. WTI futures rose from $89 to $93.2 amid reports, cited by Axios, that the Pentagon was preparing for a possible resumption of hostilities in Iran. More than $1 billion in positions were liquidated over 24 hours, $862 million of them longs. The market recovered after Donald Trump said the United States would not attack Iran before the November 3 midterm elections, and bitcoin was trading near $83,350 at the time of writing.
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