US 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 it. The Ethereum ETF saw nine consecutive days of withdrawals, with $540 million outflow 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 Together, the three siblings saw about $1.25 billion withdrawn in one week.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; there's a bigger factor pulling their money away.
That factor is the 10-year US Treasury yield, hovering around 5.3%, a multi-year high.
The Fed raised rates for the first time since 2013 on September 23, with Powell saying "inflation is too high and has lasted too long." Yields surged, reaching 5.34% in early October. This means institutions can do nothing and lend money to the US government, earning a steady 5%+ annually.
If you were a fund manager, would you risk halving your investment to bet 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 I have to pour cold water: don't blame US Treasuries entirely. Data shows BTC has still risen 84% since early 2024 and has gained during high interest rate periods. Interest rates are gravity, but not the only gravity; beyond macro factors, there are oil prices, wars, and your own leverage.
So is this a golden opportunity?
First, bad news is already priced in. From the high, BTC has dropped one-third. During the 2022 rate hike cycle, it fell over 70%. Compared to the last cycle, 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%, and over 60% in December. 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 watch not your candlesticks but 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 with full exposure. 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 US Treasury yields before buying; missing a peak is better than losing peace of mind.
US 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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