Bitcoin Price Hinges on Fed Rate Path, Not Investor Exit

Crypto fund flows are becoming increasingly sensitive to changes in the US interest-rate outlook, according to CoinShares. The firm's head of research, James Butterfill, argues that Federal Reserve policy remains a key barrier to Bitcoin breaking above $80,000.

The sensitivity was evident after Fed Chair Kevin Warsh's speech at Jackson Hole, where he said progress on inflation had been modest and price pressures were not easing quickly enough. Roughly $100 million exited digital asset investment products immediately after the speech, as markets sharply increased the probability of a September rate hike.

However, flows reversed over the following week, reaching $1 billion by Sept. 4, coinciding 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,' Butterfill wrote. 'They are trading the rate path.'