Bitcoin Fund Flows Sensitive to US Interest-Rate Outlooks

Crypto fund flows are becoming increasingly sensitive to changes in US interest-rate outlooks, according to CoinShares. The firm's head of research, James Butterfill, argued that Bitcoin is trading like gold again but with the Federal Reserve still setting the ceiling at around $80,000.

This sensitivity was evident after Fed Chair Kevin Warsh's speech at Jackson Hole, where he said progress on inflation had been modest and that price pressures were not easing quickly enough to give policymakers confidence that inflation would return to its 2% target. Roughly $100 million exited digital asset investment products immediately after the speech, but flows reversed over the following week, reaching $1 billion by September 4.

The turnaround coincided with comments from Fed Governor Christopher Waller, who pointed to recent signs of 'disinflation' and said he was inclined to keep rates steady in September if upcoming inflation data showed further progress. Investors are not exiting the asset class; they're trading the rate path, Butterfill wrote.

As of Monday, Fed Funds futures prices implied a roughly 60% chance of a rate hike following next week's Federal Open Market Committee meeting, according to CME Group. Markets are now pricing in a 25 basis-point rate hike on September 16.