CoinShares stated that the latest US consumer price index (CPI) data was not supportive for Bitcoin, adding that the persistence of inflation could limit the upside potential of the cryptocurrency market in the short term.
In an assessment shared by CoinShares Head of Research James Butterfill, it was stated that headline inflation was generally in line with expectations, while core inflation remained slightly above forecasts. According to the company, this picture increased the likelihood of a Fed interest rate hike in September, while also strengthening the risks that monetary policy may remain tight for a longer period.
CoinShares stated that markets viewed weaker inflation data as a potential catalyst for Bitcoin to sustain a move above the $80,000 level, but the latest CPI data did not meet this expectation. Therefore, it was noted that Bitcoin’s short-term upside potential may remain limited.
The company added that mutual fund flows also point to weakening market sentiment. While approximately $1.3 billion flowed into digital asset investment products last week, a net outflow of $243 million has been recorded so far this week. According to CoinShares, for Bitcoin to make a stronger and more sustained move above $80,000, weaker economic data, a more dovish policy shift from the Fed, or a new policy catalyst may be needed.
“Positive Signals for Bitcoin May Come from the US Treasury Market”
However, CoinShares noted that a different supportive factor for Bitcoin in the medium term could come from the US Treasury market. It was stated that the US Treasury’s expanded bond repurchase program has failed to significantly lower long-term interest rates despite higher purchases of long-term bonds.
According to the report, the repurchase program may be supporting market liquidity, but its inability to lower borrowing costs highlights the magnitude of structural pressure on the US bond market. Concerns about the fiscal outlook, high inflation, and a high maturity risk premium continue to limit the impact of the Treasury’s current purchases.
CoinShares believes that this failure could paradoxically turn out to be positive for Bitcoin in the long run. It notes that if long-term bond yields remain high despite the current program, pressure on US Treasury Secretary Scott Bessent to intervene more aggressively could increase. It also points out that rising oil prices could narrow policymakers’ options.
According to the company, this situation could increase the likelihood of a much broader bond-buying program aimed at lowering bond yields. Such intervention, especially if there is no simultaneous improvement in the fiscal outlook, could further reinforce the narrative of currency devaluation, which has recently been highlighted by Bitcoin and gold.
CoinShares noted that large-scale Treasury interventions could be perceived as directly suppressing borrowing costs, raising concerns about fiscal dominance, debt sustainability, and the long-term purchasing power of the dollar.
*This is not investment advice.
