30-Year Rate at 5.7%: Bitcoin Stuck Between the Fed and Debt

A slowdown in crypto flows. Inflows into digital asset investment products are slowing down after approximately $11.1 billion was raised since mid-July. At the same time, long-term U.S. bond yields are rising, despite a decline in expectations for Fed rate hikes. This divergence could change the reasons why investors buy Bitcoin.

Key Points

• Crypto fund flows are losing momentum after several months of fundraising.
• The 10-year U.S. yield exceeds 5.3%, while the 30-year yield reaches 5.7%.
• The anticipated probability of a rate hike in October has dropped from 71% to 23%.
• CoinShares anticipates increased interest in Bitcoin amid concerns over U.S. finances, without clear confirmation in the flows.

Crypto Funds Slow Down Despite Lower Rate Expectations

In his analysis on October 8, James Butterfill, head of research at CoinShares, notes a slowdown in inflows into crypto funds. He estimates that part of the previous fundraising corresponds to purchases made after price declines.

However, the evolution of monetary expectations is not enough to significantly revive demand. After a weaker-than-expected U.S. employment report, markets now assign a 23% probability to a rate hike in October, down from 71% three weeks ago.

This decline does not mean that the Fed is preparing for a cut. It mainly reflects a reduced conviction that a new hike is immediately necessary. For investors, this distinction matters: a pause keeps rates at their current level.

Moreover, economic signals remain mixed. A less dynamic job market calls for caution, while persistent inflation limits the central bank's room for maneuver. In this context, the slowdown in subscriptions does not, by itself, constitute a reversal in demand. According to CoinShares, the U.S. bond market could weigh on Bitcoin's price -- Source: X JDC Account

Bitcoin Facing Long Rates and Concerns Over U.S. Debt

The bond market sends another signal. 10-year yields exceed 5.3% and 30-year yields reach 5.7%, levels not seen in over twenty years. The manager believes this market could weigh more on Bitcoin than the Fed's upcoming decisions.

A rise in long-term rates can have several causes: inflation expectations, growth prospects, or additional compensation required for lending over a long duration. It does not automatically prove a distrust of public finances.

Typically, better-yielding bonds increase competition for capital and can dampen risky assets. But CoinShares considers another interpretation: if yields rise mainly due to concerns over U.S. debt, Bitcoin could attract investors seeking an alternative to state-issued currencies.

This hypothesis does not turn BTC into a guaranteed safe haven. Its price remains volatile, and the observed flows do not yet clearly indicate an allocation motivated by this budgetary risk.

Thus, the stakes go beyond the next Fed meeting. For Bitcoin, the rise in long-term rates represents both a financial constraint and a potential monetary argument. The famous paradox of Bitcoin we discussed recently...

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