Invest2 publishers2 min readPublished
Bitcoin rallied through the Fed's first hike since 2023 on a $6 billion ETF flow swing
Bitcoin rose about 44% in the third quarter, its best since 2017, as US spot ETF flows swung from about $5 billion out to $1 billion in. The price has tracked those funds more closely than bond yields, so the fourth quarter turns on whether they keep buying.
The Investor · Invest desk
Drafted by a language model from the sources cited here and checked against its claim ledger before publication. How we use AISend a correction
What happened
- The Federal Reserve raised its benchmark rate by 25 basis points on September 16 to a 3.75-4.00% range, its first increase since early 2023.
- The 10-year Treasury yield peaked at about 5.22% in late September, its highest since 2007, with the 30-year near 5.51%.
- Bitcoin opened the quarter near $58,500 and closed between $84,000 and $86,000, ending a three-quarter losing streak.
- In early October, Glassnode said buyers cleared a sell wall above $85,000, leaving the next cluster of offers near $87,000 at about half its size.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- contradiction Crypto Briefing's opportunity-cost warning runs against QCP's price record, in which bitcoin rose 14.6% from a September 15 low set the day before the Fed hiked.
- cost A bitcoin held at the quarter's closing price gives up about $4,440 a year of 10-year Treasury coupon, a cost every ETF buyer at those levels has accepted.
- exposure Because institutions buying through ETFs also own bonds and compare the yields, a 10-year above 5% can now reach bitcoin through fund redemptions, a route that did not exist in 2017.
The funds that drove the quarter hold the coins themselves. When money comes in, the managers have to buy bitcoin in the market, as Crypto Briefing describes it [16]. Netting the end-of-July outflow against the late-September inflow gives a two-month swing of about $6 billion [19]. The record week, a $2.39 billion intake [8], accounts for about 40% of that swing by itself [20]. QCP Capital read perpetual funding near an annualized 5.4% as a sign the advance was led by cash demand rather than leveraged positioning [12].
According to Crypto Briefing, high yields can act on that demand in two opposite ways. If investors want more to hold government debt because they worry about deficits, bitcoin's 21 million coin cap makes it a candidate for a debasement trade. If the Fed is tightening to cool the economy, liquidity drains out of speculative assets, and the outlet says the September hike points to that case for now [5].
QCP's September figures cut against the debasement case. Bitcoin rose about 12% in the month while gold fell 8.5% and the 10-year inflation-protected Treasury yield rose about 44 basis points, a split the firm read as driven by flows and positioning [13].
The jobs report then weakened the monetary case. September payrolls rose 29,000 against QCP's forecast of 84,000 to 93,000, unemployment moved to 4.2% from 4.1%, and revisions took a combined 60,000 out of July and August [14]. The softer numbers reinforced market pricing for the Fed to hold at its late-October meeting [15]. That leaves a third path. Crowdfund Insider's report noted warnings that a weak labor print is not automatically good for risk assets if it starts to look like a growth scare [15].
I think the fourth-quarter price depends on fund flows, and yields matter to the extent that they change those flows. A dollar an institution puts into the funds while the 10-year pays 5.22% is a dollar it is not putting into that bond [9]. The view can fail in two ways. If the funds return to net outflows and the price holds anyway, another buyer is setting it, most plausibly the corporate purchasers Crypto Briefing credits with supporting the $83,000-to-$87,000 range late in September [6]. If inflows continue and the price falls as yields climb, the opportunity-cost argument was right and the flows were too small to offset it [3].
What to watch
- Weekly US spot bitcoin ETF flows: a return to net outflows while the 10-year stays above 5% would show yields reaching the price through the funds.
- The Fed's late-October meeting: a second hike instead of the hold the market priced after September payrolls would support Crypto Briefing's monetary reading of high yields.
- QCP's levels: a move through $87,400 is the firm's gateway toward $90,000, while a break of $82,500, held three times in the week before the breakout, would be the first price damage of the quarter.