Bitcoin Faces September Rate Hike Clouds After August's 25% Surge

Bitcoin's August surge of 25% has come to an end as September brings intensified Federal Reserve rate hike expectations. The Fed's hawkish signals at the Jackson Hole symposium have pushed market pricing for a September rate hike to nearly 70%, with the 10-year U.S. Treasury yield briefly touching 4.798%. This development poses a formidable test for Bitcoin, which had its first positive August since 2021.

The core driver of Bitcoin's rally in August was the 'dollar debasement trade', fueled by the U.S. Treasury Department's expansion of bond buybacks and the release of Treasury General Account funds. This move improved banking system liquidity and pushed Bitcoin's correlation with gold to a six-year high, making it an attractive hedge against fiat currency risks.

Despite intensifying macro headwinds, institutional capital has not fully exited the market. BlackRock's iShares Bitcoin Trust ETF remains the primary entry point for capital, with U.S. spot Bitcoin ETFs recording net inflows of over $3 billion in late August.