Bitcoin pressured by rising yields as equities draw strength from earnings expectations

• Bitcoin lost fresh capital support as rising Treasury yields sparked $679 million in BTC ETF outflows.
• Strong Q3 earnings expectations eased the impact of rising yields on US equities.
• Wintermute warned that Bitcoin could face further downside if the 30-year Treasury yield breaks above 5.64%.

Bitcoin (BTC) is seeing a TradFi capital exodus as rising US Treasury yields weigh on digital assets, while equities draw strength from expectations of strong corporate earnings, according to Wintermute.

Crypto market diverges from equities amid hawkish Fed outlook

The loss came as Bitcoin (BTC) fell 3.2% last week, while Ethereum (ETH) declined 7.0% and altcoins dropped 2.9%.

“Crypto lost its flow support while equities kept their earnings support, so we stay constructive only if yields ease and flows return,” Wintermute wrote in a Tuesday report.

Wintermute identified the Federal Reserve's latest meeting minutes as a key factor behind the divergence between cryptocurrencies and equities.

The minutes, released Wednesday, indicated that most Fed officials expected another interest rate increase before year-end. Wintermute noted that the document contained no discussion of rate cuts, highlighting a shift in market expectations toward further monetary tightening.

Despite the hawkish signals, US equities remained resilient. The S&P 500 rose 1.2%, while the Nasdaq gained 0.2%. Brent crude increased 1.4%, gold advanced 1.2%, and long-dated US Treasuries rose 0.65%. The Russell 2000, however, declined 0.9%.

"The S&P 500 shrugged off the hawkish minutes because Q3 earnings growth estimates sit near 29% y/y and are still rising," Wintermute wrote.

Bitcoin ETF outflows deepen pressure on crypto recovery

Institutional investment flows have become another obstacle to Bitcoin's recovery. US spot Bitcoin ETFs recorded roughly $679 million in net outflows last week, marking their largest weekly withdrawal since late June.

The withdrawals coincided with Bitcoin's decline from the 86,000-87,000 range to a low near $80,400 on Thursday. Although the cryptocurrency subsequently recovered above $83,000, the rebound has yet to establish a sustained move back toward its previous local high.

Bitcoin's price action stood in contrast with the S&P 500, which gained 1.2% last week as third-quarter earnings growth estimates approached 29% year over year.

Among 66 large-cap altcoins with market capitalizations exceeding $1 billion, only 11 finished the week higher. Uniswap's UNI token was among the weakest performers, falling 15.8%.

The report noted that most of the money leaving these assets flowed toward AI-related names, with NEAR among the standout performers. The token continued outperforming after a brief decline, "with post-quantum signature support and a short squeeze both cited as causes that we could not confirm."

Wintermute highlighted stabilizing long-term Treasury yields and a return to net inflows into spot Bitcoin ETFs as necessary conditions for a sustained recovery.

“Until both arrive BTC stays the high-beta, negative-skew expression of the equity market, and we would not chase lower-quality alts on anything that resembles a rally,” the report stated.

Wintermute also identified the US September Consumer Price Index  (CPI) report, scheduled for Wednesday, as an important indicator of whether energy inflation is spreading into core inflation.

“We would turn cautious if the 30y breaks above the 5.64% it printed on September 30 or if BTC continues to bounce off the $82.5k levels,” the report stated.

Bitcoin is trading at $83,150, up 0.8% in the past 24 hours at the time of writing.