Bitcoin’s short-term path has become tougher, but the longer-term setup may be improving, according to a Friday report from CoinShares Head of Research James Butterfill.
Butterfill said firmer-than-expected core inflation increases the odds of tighter Federal Reserve policy, a combination that could keep Bitcoin capped below $80,000 for now.
Hotter core CPI clouds the near-term outlook
In the report, Butterfill described the backdrop as an unusual policy mix for Bitcoin. He wrote: 「Today’s CPI data is negative at the margin, increasing the probability of tighter monetary policy and potentially limiting the immediate upside.」
Data released Friday showed that the consumer price index excluding food and energy rose 0.3% in August from the previous month, above expectations. According to CME’s FedWatch tool, traders see an 85% chance that interest rates will be higher after the Federal Reserve meets next week.
Bitcoin has typically performed well in lower-rate environments, which is why the inflation surprise weighs on the asset’s near-term upside in Butterfill’s view.
Treasury buybacks have not pushed down long-end yields
Even so, Butterfill argued that the more important medium-term issue is the effectiveness of the U.S. Treasury’s bond buyback program. So far, the expanded program has failed to materially suppress long-term yields.
If those yields remain stubbornly high, he said, pressure could build on Treasury Secretary Scott Bessent to move toward a much larger, bazooka-style buying program aimed at forcing borrowing costs lower.
The report said: 「But the apparent failure of the Treasury’s current buying programme increases the likelihood of much more substantial intervention further ahead. If that happens, it could become one of the more powerful medium-term catalysts for Bitcoin.」
August rally followed buyback expansion
The article noted that Bitcoin posted one of its strongest runs in years in August after Treasury Secretary Scott Bessent announced that the department would double the size of its long-dated bond buybacks.
That announcement, along with the subsequent price jump, led some market participants to argue that the debasement trade had returned.
How the report frames the debasement trade
The debasement trade refers to investors buying an asset as a hedge against a currency losing value. According to the article, both Bitcoin and gold have benefited from that trade as the dollar weakens.
This story first appeared in Bitcoin Magazine and was written by Mathew Di Salvo.