By expanding its purchases of long-term U.S. Treasury bonds outside the usual refinancing schedule—and thus departing from the principle of “regularity and predictability”—the U.S. Treasury Department $BTC (+0,4%) helped the market emerge from its recent slump. A strong recovery followed, amplified by a market heavily positioned in short positions and limited hedging against rising prices. At first glance, ETF inflows also appeared impressive, raising the question of how much real risk the market has actually rebuilt. However, the attached chart shows that risk-taking remains very limited so far. A significant portion of the inflows is likely to have gone toward rebuilding carry trade positions instead, aided by the sharp rise in the CME futures basis. The massive outflows from June and July are thus far from being fully offset—so far, there has been only a limited return of investors to the market.
In the short term, the continuation of the rally depends heavily on this week’s inflation data, which is likely to significantly shape expectations regarding the Fed’s decision in September. Following the robust labor market data, expectations of a rapid interest rate cut have recently become more cautious. However, the Treasury Department’s strategy of increasingly concentrating U.S. debt issuance at the short end of the yield curve is also making monetary policy increasingly a matter of government refinancing costs. In the medium term, this creates additional pressure to keep short-term interest rates low for longer. At the same time, current inflation is largely driven by rising oil prices resulting from the war in Iran. An easing of tensions on this front is therefore likely to have a noticeable impact on the monetary policy outlook in the U.S.—and, consequently, on #bitcoin—.
You can invest in Bitcoin through the following vehicle: $BITC (+0,16%)
