Crypto fund flows are becoming more sensitive to changes in the US interest-rate outlook, and CoinShares says that sensitivity is a major reason Bitcoin has struggled to break convincingly above $80,000 even as demand for digital assets has continued.
In his latest market update, CoinShares head of research James Butterfill wrote that 「Bitcoin is trading like gold again, but the Fed still sets the ceiling」 at around $80,000.
That dynamic was visible after Federal Reserve Chair Kevin Warsh spoke at Jackson Hole. Warsh said progress on inflation had been modest and that price pressures were not easing quickly enough to give policymakers confidence that inflation was returning to the central bank’s 2% target. Digital asset investment products then saw about $100 million in outflows immediately after the speech, while markets sharply increased the probability of a September rate hike.
Flows turned the other way in the following week and reached $1 billion by Sept. 4. CoinShares linked that reversal to comments from Federal Reserve Governor Christopher Waller, who pointed to recent signs of 「disinflation」 and said he was inclined to keep rates unchanged in September if upcoming inflation data showed more progress.
「Investors are not exiting the asset class. They are trading the rate path,」 Butterfill wrote.
According to CME Group, Fed Funds futures as of Monday implied roughly a 60% chance of a rate hike after next week’s Federal Open Market Committee meeting. Markets are now pricing in a 25-basis-point increase on Sept. 16.
The moves suggest Bitcoin and the broader digital asset market remain highly sensitive to shifts in liquidity and monetary policy. Historically, easier financial conditions have supported crypto and other risk assets.
Treasury buybacks added to the liquidity backdrop
CoinShares made its assessment against the backdrop of a strong rebound in Bitcoin and the wider digital asset market last month. During that period, the US Treasury announced plans to double certain long-dated bond buybacks from $2 billion to $4 billion per operation. Bitcoin climbed from the low $60,000s to above $80,000 during the month.
The expanded buyback program is expected to run from Sept. 9 through Nov. 4.
In a Substack newsletter published last week, 21Shares co-founder Ophelia Snyder wrote that 「Around the Treasury announcement we also saw equity sell-offs and shifts across the yield curve, layered on top of the ongoing noise from the Iran war — oil and equities swinging depending on whether or not people are feeling optimistic about diplomacy on any given day.」
She added: 「Taken together, these factors suggest to me that the current Bitcoin rally may have less to do with crypto-specific catalysts and more to do with growing interest in de-risking exposure to the US specifically.」
The move reinforced the market’s focus on liquidity conditions and prompted Standard Chartered to forecast that Bitcoin could reach $100,000 before the end of the year.