CoinShares bets debt-driven Treasury yields will steer bitcoin more than the Fed

The strongest evidence for CoinShares' case comes from the rate market. Market odds of another Fed hike in October fell to 23% from 71% in three weeks after weak September payrolls ^[4], a 48-point swing ^[16]. Institutional buying still did not recover enough to confirm sustained demand for bitcoin products ^[5]. I would expect a swing that size to reach the flows if the Fed were still the main lever. It did not.

The debt half of the argument, that yields driven by borrowing worries will strengthen bitcoin's appeal over government money ^[13], has thinner support, and CoinShares says as much. It believes concern about US finances may have contributed to the $11.1 billion that arrived from mid-July ^[1], but concedes the latest flows have not established that explanation ^[6]. Spread over the roughly twelve weeks to early October, the $11.1 billion is a bit under $1 billion a week ^[17]. The firm did not give a figure for the latest week ^[7], so the slowdown cannot be measured against that pace.

A 10-year above 5.3% and a 30-year at 5.7% ^[2] can be read two ways. CoinShares reads them as investors worried about how much debt Washington needs to fund ^[10]. The other reading is that a government bond paying 5.3% is a higher bar for an asset that pays nothing. The two predict opposite flows, or rather, the same flows at opposite moments: money arriving as yields climb under the first, as they fall under the second. September fits the first, loosely, with the 10-year up more than 50 basis points ^[8] while money kept going into spot ETFs, even as bitcoin struggled to hold its gains ^[15]. This week fits the second, with yields at two-decade highs and inflows slowing ^[1].

The Treasury's buybacks add a second puzzle. In August it doubled the maximum size of certain long-bond repurchases to at least $4 billion an operation, running through early November ^[9], and long yields rose anyway. CoinShares takes the limited effect as a sign the market is worried about government finances ^[10]. Treasury Secretary Scott Bessent has acknowledged that intervention cannot directly control bond yields, and he has pointed to higher oil prices as one factor in rising borrowing costs ^[11]. An inflation premium from oil and a premium for debt risk can put the long bond at the same 5.7%. Only the second supports CoinShares' bitcoin argument.

If the 10-year holds above 5.3% and flows resume, CoinShares is right. If yields ease and the money comes back then, high yields were a headwind. The 10-year already slipped to about 5.23% after strong demand at the October 8 auction ^[12], at least 7 basis points below the 5.3% CoinShares cited ^[18]. If neither moves the money, the $11.1 billion was mostly investors returning after a stretch of lower valuations ^[14], and the debt explanation was fitted afterwards. I think CoinShares has the Fed half right and the debt half unproven. A run of weekly inflows with the 10-year still above 5.3% would prove the second judgement wrong.