Fed Rate Cut Bets Cool Impacting BTC Demand

On Wednesday, the Nasdaq Composite Index slid by 1.60%, reflecting concerns about the Fed rate path.

The Nasdaq Composite Index slid by 1.60% on Wednesday as concerns about the path of Fed rates mounted. The 10-year US Treasury yields climbed to a mid-week high of 4.260%, marking the highest level since July. Recent US economic indicators continued to point towards a resilient economy, challenging investor bets on multiple Fed rate cuts in Q4 2024.

Adding to the market uncertainty is the upcoming US Presidential Election. The latest polls show Kamala Harris leading Donald Trump by 1.8 points, although Trump has managed to narrow the gap from a previous 3.7-point deficit. Despite Harris leading in the polls, the betting platform Polymarket gives Trump a 61.1% chance of winning, compared to 39.0% for Harris.

Markets anticipate that a Trump presidency would result in higher inflation, potentially leading to a more hawkish Fed rate path. A more hawkish Fed rate path could impact the demand for riskier assets. However, Trump's proposed crypto policy goals may enhance BTC demand over the longer term, potentially outweighing the effects of a more hawkish Fed rate path.

In addition to promising to fire SEC Chair Gensler on his first day in office, Trump also aims to include BTC in the US strategic reserves. A shift in the US government's stance on BTC could significantly alter the supply-demand balance in BTC's favor and reduce the risk of oversupply.

The US government currently holds 203,239 BTC, which could increase substantially if it becomes a BTC hodler.

The US BTC-Spot ETF Market Experiences Outflows

On Tuesday, October 22, the US BTC-spot ETF market experienced total net outflows of $79.1 million, marking the end of a seven-day inflow streak. On Wednesday, the US BTC-spot ETF market is facing a second consecutive day of net outflows. According to Farside Investors:

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