Market update - October 2nd, 2026

Hike odds fell, long yields hit a 24-year high, and Bitcoin consolidated 

Bitcoin has benefited this week from a sharp reduction in near-term rate hike expectations. The catalyst was initially New York Fed President John Williams, who argued that September’s 25bp hike had reduced the urgency for further tightening and that the Fed now had time to assess incoming data. Markets responded quickly, with the implied probability of an October hike falling from roughly 75% to around 50%. Subsequent data have pushed expectations lower still, with markets now assigning roughly a 37% probability of an October hike.

The economic data itself has become more mixed. August JOLTS openings fell to 7.079M, below expectations and the lowest in five months, while September consumer confidence dropped sharply to 81.9 from 88.6, its weakest level since 2014. Both point toward softer labour demand and increasing pressure on the consumer. The latest PCE data were also relatively encouraging: core inflation rose 0.2% month-on-month and 3.0% year-on-year, below expectations, helping reinforce the argument for patience from the Fed.

The front end repriced, the direction did not 

The picture is far from uniformly weak, however. Second-quarter GDP was revised to 2.2% annualised, consumer spending rose a strong 0.9% in August and initial jobless claims have fallen to their lowest since July. The Fed is therefore looking at an unusual combination of softer forward-looking employment and sentiment indicators alongside relatively resilient underlying activity.

For Bitcoin, the reduction in rate expectations has been supportive. It reinforces just how sensitive the asset remains to monetary policy and dollar liquidity in the short term. Lower expected policy rates reduce the relative attractiveness of cash and short-duration Treasuries and typically improve the backdrop for Bitcoin and other liquidity-sensitive assets.

What is unusual is the behaviour of the Treasury market. While futures have materially reduced expectations for an October hike, longer-dated yields have continued moving higher. The 10-year Treasury briefly reached around 5.3%, its highest level since 2002. This divergence suggests investors are increasingly distinguishing between Fed policy at the front end of the curve and concerns around fiscal sustainability, heavy Treasury issuance and term premium at the long end.

That is potentially important for Bitcoin. Falling policy-rate expectations are supportive through the conventional liquidity channel, while rising long-term yields increasingly reflect concern about US fiscal sustainability rather than simply tighter monetary policy. If that distinction becomes more pronounced, Bitcoin could benefit from both a softer expected Fed path and renewed demand for non-sovereign assets.

Fund flows, however, show that investors remain cautious. We have seen only around US$150M of inflows so far this week, a dramatic slowdown from approximately US$3.5B last week. The change does not yet look like a reversal in sentiment, but it does suggest that investors are becoming more selective after such a strong period of inflows.

Overall, the macro backdrop has improved for Bitcoin, but it remains finely balanced. Softer employment, confidence and inflation data have reduced the need for another immediate hike, while the persistence of very high long-term Treasury yields is creating a separate fiscal concern. Both developments could ultimately prove supportive for Bitcoin, albeit through very different channels.