Bitcoin’s next major move may depend less on the Federal Reserve than on the U.S. bond market, according to investment firm CoinShares. In an October 8 report, the firm warned that rising Treasury yields driven by government debt concerns could become the dominant force shaping Bitcoin demand — and argued that the dynamic ultimately strengthens the cryptocurrency’s appeal as an alternative to government money.
## Fund inflows stall after an 11.1 billion USD run
The report lands at a moment of cooling momentum. Digital asset investment products attracted approximately 11.1 billion USD between mid-July and early October, according to CoinShares, before demand began losing momentum in the latest trading week.
The earlier purchases came as investors returned to cryptocurrencies following periods of lower valuations. CoinShares believes concerns about U.S. government finances may have contributed to those allocations, although the firm was careful to note that the latest fund flows have not yet established that explanation. It did not identify a specific withdrawal amount for the most recent week.
Head of research James Butterfill framed the tension directly: weaker employment, persistent inflation and rising Treasury yields are pulling markets in different directions, and the question of why Bitcoin has still ground higher may now be answered by the bond market rather than the Fed.
## Yields at two-decade highs
The bond market is the centerpiece of CoinShares’ assessment. The 10-year U.S. Treasury yield moved above 5.3 percent, while the 30-year yield reached approximately 5.7 percent — levels not seen in more than two decades, according to the firm’s research.
September was particularly harsh for government bonds. The 10-year yield increased by more than 50 basis points during the month, a move that preceded October’s further climb. The Treasury Department has responded by increasing long-term bond buyback operations to at least 4 billion USD per operation through November, but so far that intervention has not contained the rise in long-term borrowing costs.
The context is a string of weak data. September U.S. employment figures fell short of expectations, and the probability of another Federal Reserve rate increase in October dropped to 23 percent, down from 71 percent three weeks earlier, according to the shifts CoinShares tracked.
## Why falling rate-hike odds did not lift Bitcoin demand
Under the textbook relationship, fading rate-hike expectations should be bullish for risk assets. Cheaper money ahead typically lifts Bitcoin along with equities. Yet institutional buying has not recovered enough to confirm a sustained increase in demand for Bitcoin investment products, CoinShares found.
The firm’s explanation is that when yields rise because of debt concerns rather than Fed policy, the effect on Bitcoin cuts both ways. Higher yields raise the opportunity cost of holding non-yielding assets, which pressures Bitcoin in the short term. But the reason behind those yields — investors demanding compensation for holding government debt — validates the core argument for owning a fixed-supply asset outside the sovereign system.
“Concerns over government borrowing could increasingly influence how investors value Bitcoin,” the firm’s analysis concluded, in essence: bond yields driven by fiscal worry may matter more from here than the Fed’s policy rate.
That thesis is consistent with other recent assessments. In September, with the 10-year yield already above 5.2 percent, Bitcoin struggled to maintain gains despite continued investment through spot exchange-traded funds.
## What it means for the Bitcoin outlook
For investors, the CoinShares report reframes the signals worth watching. The inflation prints and payrolls numbers that drive Fed expectations still matter, but the term premium on long-dated Treasuries — the extra yield investors demand for holding government debt — may become the more honest indicator of whether the debasement trade returns in force.
The 11.1 billion USD inflow wave since mid-July already hinted that something beyond rate expectations was driving allocations. If debt fears were part of that demand, as CoinShares suggests, then a renewed climb in yields without a Fed hike could paradoxically revive, rather than suppress, the institutional flows that stalled this month.
The alternative reading is less friendly: if yields keep rising because markets fear fiscal instability, liquidity could tighten across all risk assets, Bitcoin included, regardless of the long-term narrative. The next few weeks of fund-flow data — and whether the Treasury’s buybacks cap the rise in long-term yields — should show which force wins.
CoinShares’ own position is clear. The firm sees Bitcoin as a potential beneficiary of rising U.S. debt fears, with the bond market, not the Federal Reserve, now holding the keys to the next major move.
Butterfill has been on the debt story since spring. downgrades and weak auctions move btc now more than any dot plot
5.3 pct on the 10 year is doing more damage to risk appetite than anything Powell says at this point. bonds are the actual reserve currency of markets now, bitcoin trades off real yields whether we like it or not
exactly. people keep waiting for a Fed pivot speech while the 10 year quietly bleeds every risk asset. watch the auction calendar not the FOMC calendar
CoinShares framing it this way is honest at least. BTC correlation to real yields has been tighter than to liquidity narratives for a year now. if yields crack below 4.5 the move writes itself
auction calendar over FOMC is right. one weak 10y auction prints harder on risk assets than three hawkish speeches these days
auction calendar gang. the sept 10y tails were basically a rate hike in disguise and risk assets treated them exactly like one
auction tails are the new FOMC minutes. one sloppy 30y auction moves btc more than three fed speakers at this point
the auction tail thing is real but it is becoming its own religion. one sloppy 30y print and suddenly every red btc candle is a bond story. sometimes it is just thin weekend liquidity
somewhat fair on the religion point, but the correlation held on weekday volume too. show me the btc red candle that happened while the 10y fell, the list is basically empty
fair on the weekend liquidity point but both sloppy september tails printed on tuesdays. thin liquidity excuses dont work on auction days, the calendar was the variable
reserve currency of markets is an annoyingly accurate phrase. every risk asset is a duration trade wearing a costume at these yields
a duration trade wearing a costume is exactly it. btc trades like a long bond with extra steps whenever real yields start moving
except btc pays the duration in drawdowns instead of coupons. every rally since spring started exactly when yields dipped, the report just counts it
adding to the yield channel point, the april dip toward 4.6 was the last time btc strung together a real monthly run. door has been shut since 5.0 and every rally since has been a lower high, the report just put numbers on it
costume is right. the moment the 10y pushed 5.3 every alt chart started moving with bonds, no narrative required
exactly this. the fed could cut 25bps next week and it would not matter if the 10y keeps grinding near 5.3. duration is the actual price setter now, the fed chair is just the opening act
real yields driving btc makes sense, both price future money. 5.3% risk free is a tall hurdle for an asset with no cash flows, crack under 4.5 and the door opens
4.5 is the number everyone repeats but the report is directional, not precise. watch auction tails instead, thats where repricing starts
auction tails told the same story in 2019 and everyone ignored them until the repo spike. directional is plenty if you are sizing a book around it
4.5 is doing a lot of work as a magic number. the report said directional, the comments heard a signal line and built a religion around it
every report gets religion-ified the moment it contains a number. directional was the honest word, people want a trigger line they can automate and then blame someone else for
11.1 billion in inflows stalling right as the 10y pushed past 5.3 basically confirms the report in real time. the correlation is doing the arguing
the 11.1 billion inflow stall is the cleanest evidence in the piece. money kept coming while yields sat flat, then the 10y pushed 5.3 and the bid evaporated. no fed headline did that, the auction calendar did
careful with confirms though, the report itself says last week of outflows hasnt established the debt link yet. the 11.1b run stalling at 5.3 is suggestive, thats all butterfill claimed
mapping 11.1 billion of inflows against the 10y is the least hype analysis in this space and precisely why nobody quotes it. auction calendar over dot plots, every time
the 11.1 billion inflow stall next to the 5.3 print is the whole thesis in two numbers. fed speakers gave us nothing all quarter, two sloppy auctions did all the work
one thing the piece skips, money kept flowing into btc funds at 4.9. the stall only showed up above 5. somebody out there is running a yield threshold model and it isnt the fed