James Butterfill, Head of Research at CoinShares said:
Bitcoin's latest rally is a macro story, not a crypto one. While the FOMC minutes revealed a more hawkish internal debate than the final policy decision implied, the data released since have steadily undermined the case for further tightening. A lower than expected CPI print and weaker payrolls have renewed expectations that US monetary policy is heading in a less restrictive direction, and Bitcoin, which remains acutely sensitive to shifts in liquidity expectations and real yields, has responded accordingly.
The Treasury market tells the same story, but with an important twist. Short dated yields have fallen, a clear signal that bond investors no longer expect further Federal Reserve rate hikes. At the long end, however, yields have risen, with the 30 year in particular reflecting mounting concern over the US fiscal position. This combination of easing monetary expectations alongside growing doubts over sovereign debt sustainability has historically been a constructive environment for Bitcoin, and we see any Treasury intervention at the long end as likely to be read by markets as dovish, and therefore supportive, and Bitcoin prices have reflected this over the last 24 hours.
Furthermore, we find Bessent's expanded buybacks more troubling than supportive. They may relieve pressure at the long end temporarily, but they do nothing to address the underlying fiscal problem. The purchases still need to be funded through new issuance, most likely further down the curve, which accelerates the shift toward shorter duration debt, lowers the government's weighted average maturity and leaves the fiscal position far more sensitive to Fed policy, since higher short term rates feed through into interest costs much faster. There is also a policy contradiction at work. Higher long term yields have been doing some of the Fed's tightening for it; if Treasury actively suppresses them, financial conditions loosen and the Fed may be forced to keep rates higher for longer, or even hike again, raising the Treasury's own refinancing costs more quickly given the shorter maturity profile.
The dollar adds a further leg to this feedback loop. Markets have already interpreted the intervention as yield suppression, weakening the dollar as the relative appeal of US fixed income falls, which raises import costs, adds to inflation pressure and makes it harder for the Fed to ease. In our view this is not a durable solution to high borrowing costs. It risks swapping long end pressure for a weaker currency, higher imported inflation and greater sensitivity to short term rates, while leaving the fiscal credibility problem that pushed yields higher in the first place entirely unresolved.
Bitcoin positioning has meanwhile improved beneath the surface. Whales have stopped selling and have begun to accumulate again, although not yet at a scale that would imply an immediate and sustained breakout, and are unlikely to over the next 12 months. This shift has helped underpin prices and supported Bitcoin's move convincingly above its 200 day moving average, a level historically associated with stronger rallies once overcome. We nonetheless expect the market to remain range bound for now, with the US$80,000 area an important upper boundary; a more decisive move would likely require clearer confirmation from the Federal Reserve that policy risks have shifted decisively away from further tightening.
Fund flows suggest institutional demand is returning alongside the improving macro backdrop. Digital asset investment products (ETPs) have attracted US$1.3 billion so far this week, with approximately US$715 million recorded on Wednesday, the strongest daily figure since 1st May and among the strongest of the year. Bitcoin focused products accounted for roughly US$1 billion of the weekly total, bringing year to date flows back into positive territory after an extended weaker period.
Regulatory developments in the United States, including progress on the CLARITY Act and continued engagement between the administration and the industry, are in our view more directly relevant to Ethereum, Solana and the wider altcoin market than to Bitcoin itself, though a clearer framework would improve the outlook for the sector as a whole.
The next major test is Jackson Hole. With limited forward guidance currently on offer, markets will be watching closely for signals from policymakers, including Kevin Warsh, and any comments could trigger a potential Bitcoin price breakout past US$80,000 if his comments confirm the dovish stance that markets are beginning to imply.
