Bitcoin Defies Rate Hikes: Sellers Exhausted, Scarcity Key Factor

Bitcoin's surge to $86,000 in September surprised many market observers given the Federal Reserve's rate hikes and rising Treasury yields. However, according to VanEck's Head of Digital Assets Research Matthew Sigel, the rally was largely driven by exhausted sellers rather than any single market event.

Sigel pointed out that several Bitcoin 'capitulation indicators' triggered over the summer, indicating a lack of remaining sellers in the market. The Treasury's subsequent bond-buyback announcement then accelerated the recovery, he said.

Interestingly, Sigel noted that Bitcoin has historically shown no persistent correlation with bond yields. Instead, it has exhibited a negative correlation with the U.S. Dollar Index (DXY) and a positive relationship with money supply.

The former CFTC chairman Chris Giancarlo approached the rate question from a different angle. He argued that when the Fed raises rates, the government faces higher interest costs on its debt, potentially reinforcing concerns about long-term currency debasement. Bitcoin's programmed supply limit and scarcity, he said, make it an attractive asset during periods of heavy government spending and currency debasement.

Sigel also highlighted Bitcoin's close above its 50-week moving average near $78,000 as a key technical development. He expects spot Bitcoin ETF demand to potentially return after options activity dominated the previous week.