Welcome back to Market Movers Midday. Bitcoin pulling back after the U.S. jobs report topped expectations. Now, Fed rate-height bets climbing and also reversing Thursday's post-Waller expectations. Now, swap markets pricing in about a 60% chance of an increase in rates, and that shift is already buttoning the yield curve with two-year rates up in terms of yields. But at the end of next week, the highly anticipated CPI inflation report will be crucial. Joining us ahead of the long holiday weekend here in the US is Thomas Perfumo, Chief Economist at Kraken to Weigh In. Happy Friday, Thomas. Thank you so much for joining us. So we've been seeing a lot of price action across all asset classes. But when it comes to Bitcoin, we are looking at that crypto major pulling back today after soaring past 81,000 yesterday. So What are you factoring in, including macro, and did anything fundamentally change in the broader market that's affecting crypto?
Sure. And thank you for having me. This move in crypto really started a few weeks ago when the U.S. Treasury made that surprise announcement about more than doubling their buyback program on the long end of the curve as part of their liquidity support program. And the reason why I think it's so important is because it shows that the policymakers are concerned about yields, sovereign debt yields on the long end at these levels where they are today. And this idea that you may have monetary intervention where the more and more creative you get, the more and more it looks like QE or asset expansion. That is a very positive environment for Bitcoin and one that I think was largely dispelled this year with Kevin Warsh being the pick for Fed chair, who's been very critical about asset expansion at the Federal Reserve. And so that's what Bitcoin has been tuning into the last few weeks. And we see it also in correlations. For example, it's decoupled almost completely with the Nasdaq and the S&P 500, and it's recoupled very positively to gold near year-to-date highs on a rolling correlation basis. And so that's the setup for the trade right now for Bitcoin and the reason why it's been doing so well. What we're seeing now in this interim period and in the immediate term is a heightened sensitivity to these kind of macro conditions around monetary policy. So as you mentioned, we've had a bit of a whipsaw over the last week around expectations for whether we get a Fed interest rate hike or a hold over the next couple of weeks. And that is what Bitcoin has been largely responding to on a day-to-day basis.
Yeah, and as you mentioned, the key word there is monetary policy and what we're seeing in the bond markets, not just here in the U.S., but also around the globe. And of course, when it comes to expectations, all eyes are on that inflation figures out from the U.S. at the end of next week. But when we take a step back and take a look at inflows for Bitcoin ETFs, August was the strongest month so far this year. But how critical have those institutional ETF flows been in sustaining this rally rather than just relying on leverage?
Sure. So the ETFs have been super critical to Bitcoin price action and market structure since they were launched two and a half years ago. To give you a sense between the Bitcoin ETFs and MicroStrategy, they've collectively bought over $110 billion worth of spot Bitcoin. So in my opinion, they are the marginal source of demand in the aggregate, and they're the ones that set the price trend. What we saw last year going into all-time highs in July and early October is in both periods, you had a rise in both micro strategy purchases as well as Bitcoin ETFs. And to your point, August was the strongest month this year. It was also the strongest month in over a year now. And so we're seeing a let's call it a reemergence of interest and activity in Bitcoin ETFs, which had been absent for about two months now. In June, we had the worst month since inception with $4.5 billion of outflows. And in my opinion, it was competing largely against semiconductors and AI equities, which were attracting a lot of inflows in their own category. And so Bitcoin ETFs, in my opinion, again, play a huge role. And we're seeing a resurgence in it. If you ask me what's going to be the marginal thing that pushes Bitcoin ETFs to go further in or further out, I think it is going to fall on some of the near-term catalysts, which amount to the CPI report. Of course, it's going to have a big impact on expectations for the interest rate decision. September 16th, we have the interest rate decision itself with the U.S. Fed. And September 15th, and most importantly for crypto, we have the first procedural vote scheduled for the Clarity Act in the U.S. Senate. And so those are the catalysts that I think are going to be what everyone is looking for. And you're going to see that play out through the Bitcoin ETF flows.
Yeah, indeed. There's so much on the calendar for the month of September for us to watch for. But you mentioned a key name there, and that is Strategy. So all of us have been monitoring what's happening with that company in particular, what Michael Saylor is doing. So what does this signal to you, especially as Saylor is back to buying Bitcoin?
It's a big topic, especially because Michael Saylor and Strategy, the company, of course, has been the largest net buyer of bitcoins here to date. So I know everyone's been focused on Strategy being a seller over the last couple of months. And it's true, they've sold about $400 million worth of Bitcoin over the last couple of months. But mind you, they've also net bought over $13.5 billion year to date. So in the aggregate, they are a huge player on the demand side for Bitcoin year to date. And what's been very interesting to watch is that they've completely transformed the credit profile of the company over the last two months, three months or so, where they've raised more than $6 billion of cash. to sustain their interest in dividend payments going forward, but also add flexibility against their convertible debt. And so this, in my opinion, sets them up in a position where we're no longer asking, is there a risk where they become a for seller of bitcoins near term? The question then flips to, are they going to become a more incremental or larger buyer? and for this i point people to their uh multiple or price to nav multiple which is around 1.1 ish at this time it's pretty depressed versus historical levels last year was more in the one and a half to two and a half range And so my suspicion is that they might not be able to sustain the kind of purchasing activity we saw earlier this year or last year on average. But nevertheless, I do think that they're going to be active in market at these levels. And we see that they have consistently been able to issue equity in this market because there's demand for it.
And Thomas, finally, before I let you go, we have a lot on the horizon for the final quarter of 2026 and also for the final weeks of Q3. But what are the biggest catalysts on your radar that could materially surprise the market? And when do you think you can call crypto winter actually over?
Yeah, this is the one that everyone's looking out for. Is there another shoe to drop? In my opinion, it's very path dependent. Right now, the monetary policy is very volatile around conditions with the US-Iran conflict and oil prices, which have not been trending well recently. I do think that this next inflation report is going to be critical in showing that kind of disinflationary trend that keeps things on hold if we're able to achieve that. So that's going to be a major catalyst, everything to do with monetary policy, not just this month, but October and certainly December, where there's still a lot of expectations that you're going to see tightening over the next couple of months. So that's one. I think the Clarity Act is the most important idiosyncratic risk for crypto. And if we get that passed, it's going to be, I think, a very positive Catalyst or event right now mind you the prediction market odds already have very low expectations They're at year-to-date lows below 20% that we see it past this year And so it's a very skewed kind of risk reward profile. And then lastly, I would point people to Keeping up on anything to do with the anthropic IPO because as we saw with SpaceX That was a massive market liquidity event and you tend to see outflows not just in Bitcoin but a lot of different products as people shore up the capital to to invest in that exciting opportunity. And so I assume that if Anthropic is going to be raising anything to the caliber that we saw with SpaceX, which was a tremendous amount of money, it could have an impact on the market as well.
Well, Thomas, we will have to leave it there for today. But thank you so much for joining us and weighing in. And thank you so much for sharing your expertise. Have a great weekend.
Thank you, you too.
