What Could Matter More to Bitcoin Than the Fed? CoinShares Outlines a New Scenario

CoinShares argued that the U.S. Treasury market could become a more important driver for Bitcoin than Fed decisions as inflows into crypto funds slow.

CoinShares’ October 8 assessment, cited by Wu Blockchain, focused on the divergence between rate expectations and long-term Treasury yields. Digital asset funds have recorded approximately $11.1 billion in inflows since mid-July, while inflows slowed significantly this week.

During the same period, the U.S. 10-year Treasury yield rose above 5.3%, while the 30-year Treasury yield reached 5.7%. Both maturities are trading near their highest levels in several decades. By contrast, weaker-than-expected September employment data lowered expectations for a rate hike in October; the probability priced in by markets fell from 71% to 23% in three weeks.

Why Treasury Yields Are Rising Could Be Decisive

The scenario CoinShares highlighted for Bitcoin hinges on the reason behind rising yields. If long-term interest rates are rising because of concerns about U.S. fiscal sustainability rather than strong economic growth, investors’ view of Bitcoin could change.

In that case, Bitcoin could gain greater prominence as an alternative to government-issued currencies. According to the firm’s thesis, the Treasury market could, as a result of such a shift, have a greater influence on Bitcoin than the Fed’s interest rate policy.

Fund Flows Will Offer the First Sign

This scenario has not yet produced a clear response in fund inflows. In the coming weeks, the direction of flows into and out of digital asset funds will be important to watch for signs of whether investors are turning to Bitcoin amid concerns about the Treasury market.