The trajectory for Bitcoin appears to be more challenging in the short term; however, the long-term outlook may be improving, as indicated by a recent report.
In a note released on Friday, James Butterfill, the Head of Research at European asset management firm CoinShares, suggested that stronger-than-expected core inflation elevates the likelihood of a more restrictive Federal Reserve policy, which could hinder Bitcoin’s ascent below the $80,000 mark for the time being.
Nevertheless, Butterfill contended that the long-term perspective hinges on the U.S. Treasury’s bond buyback program failing to reduce long-term yields. Such a failure could ultimately bolster the debasement narrative that has historically supported both Bitcoin and gold.
The report stated, “The result is therefore a somewhat unusual policy mix for Bitcoin. Today’s CPI data is negative at the margin, increasing the probability of tighter monetary policy and potentially limiting the immediate upside.”
It further elaborated, “However, the apparent failure of the Treasury’s current buying program increases the likelihood of much more substantial intervention in the future.”
Should that occur, it could emerge as a significant medium-term catalyst for Bitcoin.
Recent data disclosed that the consumer price index, excluding food and energy, rose by 0.3% in August compared to the previous month, surpassing expectations.
According to CME’s FedWatch tool, traders currently anticipate an 85% probability that interest rates will increase following the Federal Reserve’s meeting next week. Historically, Bitcoin has performed favorably in a low interest rate environment.
However, the U.S. Treasury’s expanded bond buyback program has not yet succeeded in significantly reducing long-term yields.
Should yields remain persistently high, Butterfill noted, it would create mounting pressure on Treasury Secretary Scott Bessent to escalate to an expansive, “bazooka-style” buying program with the aim of lowering borrowing costs.
In August, Bitcoin experienced one of its most robust performances in years following Secretary Bessent’s announcement of a doubling in the size of long-dated bond buybacks.
This announcement and subsequent price rise have led some analysts to suggest that the much-discussed debasement trade has re-emerged. This trade refers to investors acquiring assets as a hedge against currency devaluation.
Both Bitcoin and gold have benefitted from this trend as the dollar weakens.
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