Key signals for Bitcoin: inflation and bond dynamics!

Bitcoin faces resistance in the short term, but a long-term positive pattern may have given rise to

In the short term, the environment for Bitcoin to start a new round of rising prices seems quite difficult. However, James Butterfill, head of research at CoinShares, believes that the current market landscape will actually help lay a positive foundation for Bitcoin in the medium to long term.

Pressure from high inflation expectations: Why limit short-term rebound?

CoinShares pointed out in an assessment released on Friday that higher-than-expected core inflation data increases the possibility of the Federal Reserve adopting tighter monetary policy. As a result, he predicts that the Bitcoin price may still remain below $80,000 for now.

Data showed that the U.S. consumer price index (CPI) excluding food and energy prices rose 0.3% month-on-month in August, which exceeded previous market expectations. High core inflation has reinforced market expectations that the Fed will keep interest rates high. According to data from the CME FedWatch tool, investors expect the probability of maintaining high interest rates after the Fed's next meeting to be as high as 85%.

This is crucial for Bitcoin. Historical data shows that digital assets tend to perform better in market environments dominated by low interest rates. Therefore, expectations of tightening monetary policy may limit Bitcoin's short-term upside potential.

Treasury bond repurchase dilemma: What is the new catalyst?

The most eye-catching focus in Butterfill's analysis is the Treasury Department's treasury bond market operations. Although the Ministry of Finance has expanded its repurchase program for long-term government bonds, long-term yields have not yet fallen significantly.

If yields remain high, the pressure on Treasury Secretary Scott Bessent is expected to increase further. Butterfill pointed out that in this case, in order to reduce borrowing costs, a larger,"blockbuster"-level bond purchase program may emerge.

Such interventions could be a catalyst for Bitcoin's medium-term strength. Because of broader expectations of monetary and fiscal intervention, investors may reinvigorate the need to seek safe haven against the risk of currency devaluation.

Is the "devaluation of the legal currency" narrative rekindled?

Previously, the U.S. Treasury Department announced that it would double its Treasury bond repurchase program, prompting Bitcoin to show one of its strong performances in recent years in August. As prices rose, the long-discussed concept of "Debasement Trade" in the market once again came into view.

This strategy refers to investors buying specific assets to protect against the risk of currency devaluation. Bitcoin and gold have been the two core assets in this narrative during the weakening of the U.S. dollar.

Therefore, the current situation does not present the macro picture common to Bitcoin. On the one hand, inflation data has intensified pressure to raise interest rates in the short term; on the other hand, the weakness of the national debt market has enhanced the possibility of more comprehensive intervention in the future.

Short-and-medium term outlook: unconventional policy mix

According to Butterfill, these development factors form an "atypical" policy mix at the Bitcoin level. August CPI data limited short-term upside by increasing the likelihood of the Fed tightening policy.

However, if the Treasury's existing Treasury-buying program fails to effectively drive down long-term yields, stronger intervention measures will be possible. Butterfill believes that such developments could become one of Bitcoin's most powerful catalysts in the medium term.

Therefore, investors focusing on the cryptocurrency market should not only keep a close eye on inflation data, but also pay close attention to Treasury yields and subsequent measures by the U.S. Treasury Department.

Disclaimer : This content does not constitute any investment advice. There are high risks in the market, please conduct independent research before making an investment decision.