Market update - September 4th, 2026

Bitcoin is trading like gold again, but the Fed still sets the ceiling

Fiscal concern has carried Bitcoin from the low US$60ks to US$80.1k. Getting convincingly above that level takes either a resolution in Iran or a further loss of confidence in US government debt.

Bitcoin has traded increasingly like gold over the last couple of weeks as the debasement trade has returned to the fore, meaning investors buying hard assets as a hedge against the erosion of currency value. The catalyst has been renewed concern around US fiscal sustainability and the Treasury's decision to step up purchases of long-dated government debt. Bitcoin responded strongly, rallying from the low US$60ks into the high US$70ks, before briefly reaching US$80.1k following more dovish comments from Fed Governor Christopher Waller.

Monetary policy is the binding constraint

Kevin Warsh's comments on Friday were read as hawkish, with a clear emphasis on inflation rather than the weakening employment picture, and markets moved towards pricing roughly a two-thirds probability of a September rate hike. Waller subsequently pushed back against that interpretation, arguing that recent inflation data show encouraging signs of disinflation and indicating that, provided August inflation confirms the trend, he would favour keeping rates unchanged in September. His comments helped ease Treasury yields and supported Bitcoin's move above US$80k.

We think the market's pricing of a September hike still looks too aggressive, particularly given softer labour data and the divergence now emerging within the Fed over how much weight to place on inflation versus employment.

Flows into digital asset investment products track those expectations closely. Around US$100M left the products immediately after Warsh spoke on Friday. This week they have rebounded, with US$1B week to date, against US$2B last week and US$2.9B the week before, the strongest weekly inflow of the year. Investors are not exiting the asset class; they are trading the rate path.

Iran, and the oil route into inflation

Iran remains central to the outlook because of its effect on oil, and therefore on inflation expectations. Our base case is still some form of resolution, particularly as political pressure builds ahead of the US midterms. The tail risk is meaningful, though. China has been rationing oil consumption, which has helped stop prices rising more aggressively. If Chinese demand normalises while supply remains disrupted, another sharp oil spike could push inflation higher and harden expectations for tighter policy. That would be negative for Bitcoin in the near term.

The bond market is the second catalyst

Ten-year Treasury yields remain elevated at around 4.7%. The market is demanding a substantially higher yield to hold US government debt, reflecting concern around a debt-to-GDP ratio of roughly 122% and the scale of issuance still to come.² Treasury attempts to suppress long-end yields have so far had limited effect.

That creates a difficult policy trade-off. More aggressive Treasury intervention would shorten the average maturity of government debt and make the fiscal position more sensitive to Fed policy: higher rates would feed more quickly into government interest costs, while suppressing yields risks adding inflationary pressure. A genuine loss of confidence in US government debt remains a tail scenario, but it would be exceptionally supportive for both gold and Bitcoin as investors look for alternatives to sovereign assets.

Blockchain equities offer a constructive read on that same theme. Inflows reached roughly US$27M this week and more than US$100M over the last month, alongside strong performance across the sector. With direct crypto fund flows slowing, that looks less like money leaving the sector than money rotating within it, towards the infrastructure and tokenisation businesses that get paid whether or not the price of Bitcoin moves this quarter.

What has to break the range

For Bitcoin to move convincingly through US$80k, we think one of two things needs to happen: a resolution of the Iran conflict that lowers inflation and rate expectations, or a further deterioration in confidence in US sovereign debt that accelerates demand for non-sovereign stores of value. Until one arrives, range trading remains the more likely outcome.

Two dates carry most of the information from here. The August inflation print will tell us whether Waller's disinflation case holds, and the September meeting will show whether the Fed's internal split resolves towards inflation or employment. Everything else is noise around those two.