Report Says Investors Trading Fed Rate Path, Not Exiting Crypto

James Butterfill, Head of Research at CoinShares, noted that capital flows into cryptocurrency funds are increasingly sensitive to Fed rate expectations. Despite Bitcoin exhibiting gold-like characteristics, Fed monetary policy remains the key barrier preventing it from breaking above the $80,000 resistance level. Butterfill emphasized: "Investors are not exiting this asset class; they are simply trading the rate path." Dynamic data on capital flows confirms this observation.

He mentioned that following Fed Chair Kevin Warsh's Jackson Hole speech, which indicated limited progress on inflation, market expectations for a September rate hike intensified, leading to approximately $100 million in outflows from digital asset funds. However, when Fed Governor Christopher Waller signaled "disinflation" trends and leaned toward a September pause, market sentiment quickly reversed, with inflows reaching $1 billion by September 4. According to CME Group data, federal funds futures priced in approximately a 60% probability of a 25-basis-point rate hike on September 16.

[TechFlow]