Bitcoin has emerged as a potential beneficiary of growing concerns over U.S. government debt, with CoinShares warning that rising Treasury yields could become more important to the cryptocurrency’s next move than the Federal Reserve’s interest rate decisions.

CoinShares reported on October 8 that digital asset fund inflows had slowed considerably this week after attracting $11.1 billion since mid-July. The research firm pointed to the 10-year U.S. Treasury yield rising above 5.3% and the 30-year yield reaching 5.7%, levels not seen in more than two decades. It argued that concerns over government borrowing could increasingly influence how investors value Bitcoin.

The analysis comes after September U.S. employment data fell short of expectations, reducing the probability of another Federal Reserve interest rate increase in October. Despite that change, institutional buying has not recovered enough to confirm a sustained increase in demand for Bitcoin investment products.

Bitcoin fund inflows slow after $11.1 billion surge

Digital asset investment products attracted approximately $11.1 billion between mid-July and early October, according to CoinShares, before demand began losing momentum during the latest trading week.

The earlier purchases came as investors returned to cryptocurrencies following periods of lower valuations. CoinShares believes concerns about U.S. government finances may have contributed to those allocations, although the latest fund flows have not established that explanation.

The slowdown follows several months in which institutional investors increased their exposure through regulated crypto investment products. However, changing expectations around inflation, borrowing costs and economic growth have complicated the outlook.

CoinShares described the current weakness in fund flows as a period of uncertainty, with investors weighing softer employment figures against persistent inflation and rising government borrowing costs.

The firm’s findings are consistent with other recent assessments of the Bitcoin outlook amid elevated Treasury yields. In September, the 10-year yield had already climbed above 5.2%, while Bitcoin struggled to maintain gains despite continued investment through spot exchange-traded funds.

CoinShares did not identify a specific amount of withdrawals for the latest week in its October 8 analysis. The $11.1 billion figure represents cumulative inflows since mid-July, not the amount invested during the current reporting period.

U.S. bond yields climb despite Treasury intervention

The U.S. bond market has become a central concern in CoinShares’ assessment after long-term government borrowing costs climbed to levels last recorded more than two decades ago.

According to the report, the 10-year Treasury yield moved above 5.3%, while the 30-year yield reached approximately 5.7%. September was particularly difficult for government bonds, with the 10-year yield increasing by more than 50 basis points during the month.

The increase continued despite efforts by the U.S. Treasury to support liquidity through government bond repurchases.

In August, the Treasury expanded its long-term bond buyback program, doubling the maximum size of certain operations to at least $4 billion. The Treasury bond repurchase program was scheduled to continue at the expanded level through early November.

CoinShares argued that the limited effect on yields suggests investors remain concerned about government finances and the amount of debt Washington needs to fund.

Treasury Secretary Scott Bessent has acknowledged that government intervention cannot directly control bond yields. He has pointed to higher oil prices as one factor contributing to increased borrowing costs.

Market movements have not been entirely one-sided. Following strong demand at the October 8 Treasury auction, the benchmark 10-year yield retreated to approximately 5.23%, while the 30-year bond auction cleared at 5.618%.

The auction results showed that investors continued purchasing long-term government debt even after yields reached multi-decade highs.

Bitcoin may become more attractive if U.S. debt concerns grow

CoinShares believes the reason behind rising bond yields could determine how Bitcoin performs 
in the coming months.

When government bond yields increase because of stronger economic activity or expectations of tighter monetary policy, higher returns on Treasury securities can place pressure on cryptocurrencies.

However, the firm presented a different possibility in its October 8 analysis. If investors demand higher yields because they are increasingly concerned about the sustainability of U.S. public finances, Bitcoin could attract interest as an alternative to government-issued money.

The assessment remains conditional. CoinShares has not established that the recent rise in Treasury yields is driven primarily by fiscal concerns or that investors are already moving into Bitcoin for that reason.

According to the firm’s head of research, James Butterfill, the bond market may ultimately become a more important influence on Bitcoin than the next Federal Reserve decision.

CoinShares identified sustained investment fund inflows as the evidence needed to support its interpretation. Stronger purchases linked to fiscal concerns would provide support for the idea that investors increasingly view Bitcoin as an alternative monetary asset.

For now, the firm sees conflicting economic signals preventing a clearer direction in fund demand.

Fed rate hike odds fall as inflation remains a concern

The Federal Reserve faces a difficult policy decision after weaker September payroll figures raised concerns about employment while inflation remained elevated.

CoinShares reported that the market-implied probability of an October interest rate hike had dropped to 23%, compared with 71% three weeks earlier.

The decline followed weaker employment figures that encouraged traders to expect a pause in monetary tightening. However, economic activity has remained relatively resilient, with purchasing managers’ index data continuing to indicate expansion.

The reduced probability of another Fed rate hike has previously supported expectations that Bitcoin could face less pressure from monetary policy.

Federal Reserve Vice Chair Philip Jefferson indicated on October 2 that policymakers might need additional time before raising interest rates again, given the changing economic conditions.

Inflation continues to complicate the decision. Elevated oil prices linked partly to tensions involving Iran have increased concerns about energy costs, while consumer spending and business activity have held up better than the labor market.

In a separate October 5 assessment, Bitget Wallet research lead Lacie Zhang identified a conditional Bitcoin price range of 90,000–93,000 if bond yields eased, inflation cooled and investment demand strengthened.

CoinShares has taken a different focus, identifying changes in the bond market and the reasons behind rising borrowing costs as areas to watch alongside central bank policy.

Investors will receive another inflation reading when September’s Consumer Price Index is released on October 14, ahead of the Federal Reserve’s next policy meeting later in the month.

The October 29 calendar includes the first estimate of third-quarter U.S. gross domestic product and September personal consumption expenditures data, according to the economic schedule cited in recent market analysis. Those releases will provide further information on consumer spending, inflation and economic growth following September’s weaker employment figures.

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