CoinShares Says Bond Market May Outweigh Fed Policy as Bitcoin Fund Inflows Slow

Bitcoin market outlook featuring rising U.S. Treasury yields, slowing digital asset fund inflows and changing expectations for a Federal Reserve rate hike.

The U.S. bond market may become a more important driver of Bitcoin than Federal Reserve policy as digital asset investment fund inflows lose momentum, according to Wu Blockchain CoinShares. The firm said on October 8 that fund inflows had slowed markedly this week after attracting approximately $11.1 billion since mid-July, while long-term U.S. Treasury yields climbed to levels near multi-decade highs.

The shift comes as the 10-year U.S. Treasury yield has risen above 5.3% and the 30-year yield has reached 5.7%. At the same time, market expectations for an October interest rate hike have changed substantially following weaker-than-expected U.S. employment data for September.

The market-implied probability of an October rate hike fell to 23%, down from 71% three weeks earlier. CoinShares argued that these developments could make movements in the bond market increasingly important for Bitcoin, potentially shifting attention away from the Federal Reserve's immediate policy decisions.

Rising Treasury Yields Put Bond Market in Focus

The increase in long-term Treasury yields is a central part of CoinShares' assessment. The 10-year yield has moved above 5.3%, while the 30-year yield has climbed to 5.7%. Both are near multi-decade highs, according to the figures cited in the report.

CoinShares highlighted the possibility that higher long-term borrowing costs may reflect concerns about the sustainability of U.S. government finance rather than expectations of stronger economic growth. The distinction matters to the firm's argument because the underlying reason for rising yields could influence how investors assess government-issued money and alternative assets such as Bitcoin.

If fiscal sustainability concerns become a more significant factor behind rising yields, Bitcoin could increasingly be viewed as an alternative to government-issued money, CoinShares argued. This remains a conditional assessment rather than a confirmed market trend, and the firm noted that current investment flows have not yet clearly demonstrated that thesis.

Rate-Hike Expectations Have Declined

The weaker-than-expected September jobs data has coincided with a sharp reduction in the market-implied probability of an October rate hike. That probability dropped from 71% three weeks ago to 23%, reflecting a significant change in market expectations for the Federal Reserve's next policy decision.

However, CoinShares' analysis suggests that the outlook for Bitcoin may depend on more than whether the Fed raises or holds interest rates. Long-term Treasury yields and the forces driving them could become more influential in shaping the broader investment environment.

The distinction is between the direction of monetary policy and the reasons investors demand higher yields on longer-dated U.S. government debt. If rising yields increasingly signal concern about fiscal sustainability, rather than stronger growth, the implications for Bitcoin could differ from those associated with a conventional growth-driven increase in yields.

Fund Flows Remain a Key Indicator

Digital asset investment products attracted about $11.1 billion in inflows since mid-July, but CoinShares reported that the pace of inflows slowed markedly during the week discussed on October 8. The slowdown has not yet provided clear evidence that investors are embracing Bitcoin as an alternative to government-issued money in response to fiscal concerns.

CoinShares identified fund flows as an important indicator to monitor in the coming weeks. Their direction could help show whether investment demand begins to align with the firm's thesis about the growing importance of bond-market conditions.

For now, the key figures include Treasury yields above 5.3% for the 10-year note and 5.7% for the 30-year bond, an October rate-hike probability of 23% compared with 71% three weeks earlier, and approximately $11.1 billion in digital asset fund inflows since mid-July. CoinShares said fund flows have yet to clearly reflect its view that rising fiscal sustainability concerns could strengthen Bitcoin's role as an alternative to government-issued money.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.

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