U.S. Treasury 5.3%: The "culprit" draining crypto ETFs, or still the last golden opportunity?
Last week, a Solana ETF that had only seen inflows for 14 consecutive weeks experienced its first outflow.
Not just that. The Ethereum ETF saw nine consecutive days of withdrawals, with $540 million flowing out in one week—the worst week since January this year. The Bitcoin ETF also ended three weeks of net inflows, shedding $680 million. Together, the three accounted for about $1.25 billion withdrawn in one week.
Many people's first reaction: Are institutions bearish on crypto?
My view is that institutions are not bearish on crypto; rather, a bigger factor is pulling their money away.
That factor is the 10-year U.S. Treasury yield, hovering around 5.3%, a multi-year high.
The Federal Reserve raised rates for the first time since 2023 on September 23, with Powell stating "inflation is too high and has lasted too long." Yields surged, reaching 5.34% in early October. This means institutions can do nothing and just lend money to the U.S. government, earning a steady 5%+ annually.
If you were a fund manager, would you risk a 50% loss betting on a coin that generates no cash flow?
I call this "interest rate gravity." 5.3% is the gravitational pull; all non-interest-bearing assets—including crypto, gold, and growth stocks—are being dragged down. BTC fell from a high of 126,000 to a low of 63,000 in July, now rebounding near 84,000. ETF outflows aren’t about bearish sentiment; it’s gravity at work.
But let me pour some cold water: don’t blame U.S. Treasuries entirely. Data shows BTC has still risen 84% since early 2024, even during high interest rates. Interest rates are gravity, but not the only force; macro factors like oil prices, conflicts, and your own leverage also matter.
So, is this a golden opportunity?
First, bad news is already priced in. From the peak, BTC has dropped about one-third. During the 2022 rate hike cycle, it fell over 70%. Compared to last time, this is moderate.
Second, the market is already betting on the "end of rate hikes." According to my data, the chance of another hike in October is just over 10%, while December exceeds 60%. Smart money bets the toughest hike is almost over.
Third, the turning point depends on one signal: yields reversing. In early October, yields dropped from 5.34% to 5.25%, and BTC immediately bounced back to 84,000. See, crypto prices don’t watch your candlesticks; they watch the bond curve.
So what to do?
If you hold spot, don’t panic sell; most of the bad news is already out.
If you haven’t entered yet, don’t rush to bottom-fish full position. The most expensive thing about catching a falling knife isn’t the knife itself, but thinking it has landed. Wait for a clear drop in U.S. Treasury yields before acting. Missing a peak is better than losing peace of mind.
U.S. Treasury 5.3% is currently the biggest "gravitational pull" in the crypto market. The day this gravity disappears will be the start of capital inflows.
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