Bitcoin Magazine
Bitcoin’s ‘Unusual Mix’: Bearish Inflation Print, Bullish Buyback Failure
A recent analysis indicates that Bitcoin faces near-term headwinds, though its long-term outlook may be strengthening.
James Butterfill, Head of Research at European asset manager CoinShares, explained in a Friday briefing that higher-than-anticipated core inflation heightens the likelihood of restrictive Federal Reserve policies, which might restrict Bitcoin from breaking past $80,000 in the near future.
Conversely, Butterfill noted that the long-term thesis hinges on the U.S. Treasury’s ongoing bond buyback initiative falling short in lowering long-end yields. This lack of success could ultimately reinforce the debasement narrative that has recently bolstered both gold and Bitcoin.
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 added, “But the apparent failure of the Treasury’s current buying programme increases the likelihood of much more substantial intervention further ahead.”
The document concluded, “If that happens, it could become one of the more powerful medium-term catalysts for Bitcoin.”
Figures released on Friday showed that the consumer price index increased by 0.3% in August month-over-month when excluding volatile food and energy components, coming in above forecasts.
Data from the CME FedWatch tool indicates an 85% probability that the Federal Reserve will maintain or raise interest rates following next week’s meeting. Historically, Bitcoin has thrived in low-rate environments.
Meanwhile, the expanded U.S. Treasury bond buyback strategy has thus far been unable to significantly suppress long-term yields.
Butterfill pointed out that persistent high yields will increase pressure on Treasury Secretary Scott Bessent to implement a much larger, “bazooka-style” purchasing campaign designed to forcefully reduce borrowing expenses.
Back in August, Bitcoin experienced one of its strongest rallies in years following Treasury Secretary Scott Bessent’s declaration that the department would double the scale of its long-dated bond buybacks.
This announcement and the subsequent market rally prompted observers to declare the return of the debasement trade—a strategy where investors purchase assets to hedge against currency devaluation.
Amid a weakening dollar, both Bitcoin and gold have gained strength as part of this macroeconomic trend.
Frequently Asked Questions
Why might Bitcoin stay below $80,000 in the near term?
Firmer-than-expected core inflation increases the likelihood of tighter Federal Reserve policy, which can cap immediate upside for Bitcoin.
What is the U.S. Treasury bond buyback failure?
The Treasury’s expanded bond buyback program has failed to materially suppress long-term yields, which could lead to larger future interventions.
What is the debasement trade?
It is a strategy where investors purchase assets like Bitcoin and gold as a hedge against a currency losing value.
