Funds Flood Back into Bitcoin as Hike Fears Subside

The Bitcoin price has surged by about 13% since the Federal Reserve raised interest rates on September 16. Funds that had sold their holdings before the hike returned, driven by three key factors.

The bad news was already priced in: rate futures indicated a 69.6% chance of a hike on September 11, and the CLARITY Act failed to pass the Senate vote on September 15, causing Bitcoin to drop 3.3%. However, this bad news was reflected in the price, which fell to near $75,600.

The second reason for funds' return is that higher interest rates no longer scare buyers. The two-year Treasury yield, a measure of what investors expect from future Fed hikes or cuts, climbed to 4.76% on September 18 and 21, Bitcoin's two biggest up days. Fundstrat's Tom Lee argued the Fed cannot become more hawkish than this.

The third reason is that there was room to rise: the UTXO Realized Price Distribution (URPD) chart showed that a significant portion of Bitcoin supply is held near $87,100 and $88,400. This means fewer holders are waiting to sell at breakeven, creating space for price growth.