Bitcoin Enters ‘Rektember’ as Rate-Hike Risk Combines With Seasonality to Threaten Rally

Bitcoin traded near $78,000 on Tuesday while a global bond sell-off drove Japan’s 10-year yield to a level not seen since 1996 and US Treasuries followed suit, raising the question of whether August’s gains can carry into autumn.

Spot changed hands around $78,000 after touching a morning high near $79,000, according to Cointelegraph. A modest move. The backdrop was anything but. Japan’s 10-year JGB yield hit 3% for the first time in nearly three decades. The 30-year reached a record 4.18%. The US 10-year Treasury sat at 4.78% at the time of writing. Long-term sovereign yields worldwide now stand at their highest since the 2008 financial crisis.

Robin Brooks, senior fellow at the Brookings Institution, wrote on X: “For the past two years, Japan has been in a ‘Liz Truss’ bond market crisis whereby its currency falls even as government bond yields go ever higher. We’ve never had a major G10 sovereign experience something like this and it’s deeply destabilizing.”

Rising yields weigh hardest on assets that generate no income. Equities took the hit first. S&P 500 futures dropped 0.3%, leaving the index near 7,660, its weakest mark since Aug. 4. Oil compounded the pressure. WTI traded around $88 a barrel and Brent held above $92 following renewed US-Iran clashes in the Strait of Hormuz.

The picture is not uniformly bearish. Bitcoin ETFs pulled in nearly $1 billion in inflows last week, according to The Block’s Data and Insights newsletter. Year-to-date inflows total $1.89 billion. BlackRock’s IBIT alone accounts for $1.2 billion. Traders, as ever, disagree on what comes next.

Bitcoin is also tracking gold more closely than at any point in recent memory. The 90-day Pearson correlation coefficient between bitcoin and gold reached an all-time high. The 30-day metric hit a yearly peak of 0.8. Both assets are climbing against a backdrop of fiscal deficit anxiety and what analysts call a debasement trade, where investors pile into scarce assets as governments expand debt issuance.

History cuts both ways. In 2020, bitcoin gained 172% after its gold correlation reached 0.6 and then decoupled. In the fourth quarter of 2022, the BTC-gold correlation climbed from near zero to 0.5, and bitcoin rallied nearly 350% over the 14 months that followed. Correlation spikes have marked bottoms more often than tops. That is the bull case the data supports.

Sentiment tilts optimistic. The Fear and Greed Index reads 68, greedy territory, after dipping to 5 earlier this year in extreme fear. The Aug. 17-21 rally was the fourth-largest weekly move on record, with the index gaining more than 10 points a day. The Block’s research note flagged a caveat: “Despite a high fear-greed ranking, participants have observed that the market does not feel the same level of volatility or frothiness associated with a market top or blow-off event.”

On the policy side, US Treasury Secretary Scott Bessent said the maximum size of debt buyback transactions would rise to $4 billion from September. The announcement landed as long-end yields pushed to multi-year highs. Arthur Hayes has argued for years that the Federal Reserve will eventually deploy the FIMA repo facility to absorb Treasury supply. Bessent hinted at its future use in August.

Price forecasts for the coming weeks cluster between $76,000 and $82,000, with thick resistance from current spot up to $86,000. The lower bound sits less than 3% below Tuesday’s price.