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Macro fog deepens, bitcoin holds the high ground
The macro signal from the Fed remains mixed. This week’s FOMC minutes underscored a split committee: almost all supported the quarter-point cut, a few saw merit in holding, and Stephen Miran argued for faster and deeper easing, with an appropriate rate nearer 2%. Others highlighted significant tariff-related inflation risks, underlining how polarised the FOMC is at present. Markets judged that, together with Powell’s remarks at the Community Bank Conference, the statement added little new information. As a result, monetary policy expectations have barely moved, stalling the weekend rally in Bitcoin prices.
No data due to the shutdown
The shutdown is the bigger near term problem. It delays key releases, muddies the near term read on growth and prices, and lifts risk premia. History is clear. In 2013 payrolls were delayed until the government reopened and that episode shaved roughly a quarter point from quarterly GDP. The 2018 to 2019 shutdown kept nonfarm payrolls flowing but disrupted other series and elevated uncertainty. Today, the Senate remains deadlocked and the most realistic outcome is a short continuing resolution, leaving an uncertain economic environment that markets are likely to increasingly dislike. Polymarket’s data continues to highlight scepticism to a quick resolution to the shutdown with a 93% probability of it being resolved on 15th October or later.
Crypto: significant inflows into ETPs
Flows are doing the heavy lifting in digital assets. Global ETP and fund inflows have already surpassed last year’s total, now at about US$48.89B year to date. The rebound last week has carried into this week, with US$3.33B so far, led by Bitcoin inflows of US$2.67B. Solana now sits near US$2.65B of inflows for the year, representing about 60% of assets<< under management. XRP YTD inflows are now around US$1.88B highlighting the hype around the imminent US ETF launches. We are not seeing a broad altcoin stampede into altcoins though, outside those two, demand is patchy, implying a much more selective investor in this cycle.
Bitcoin remains the macro bellwether. The combination of a dovish September cut, a very weak ADP print that sharpened concerns ahead of official payrolls, and the optics of fiscal dysfunction helped it to a new all time high over the weekend. The strong performance of both gold and Bitcoin this year highlights that fiscal governance risk is a tailwind for non sovereign assets.
