BTC | Bitcoin Absorbs Two Major Policy ShocksBitcoin took two policy shocks in the space of 48 hours and managed to hold up surprisingly well. Tuesday’s failed Senate cloture vote on the CLARITY Act sent BTC down roughly 4% to $75,900. The following afternoon, the Fed delivered its expected 25bp rate hike, pushing spot back toward $77,000 before settling around $76,500. Shorts were squeezed along the way, with roughly $260 million in short liquidations
Institutional flows told an interesting story. Spot Bitcoin ETFs saw $450 million in outflows on September 15 and another $296 million on September 16. Then the trend reversed on September 17, with $159 million flowing back in. IBIT alone accounted for $184 million. The key detail is the timing: ETF outflows reached their low point on the day of the rate hike, and the largest fund turned into a buyer the following day. Total ETF assets now sit around $96.2 billion.
Bitcoin dominance remained near 56.6%, suggesting this was more of a broad risk repricing than a crypto-specific breakdown. Just 25 of the top 200 crypto assets are currently positive for the year, while the median performer is down roughly 55%. Bitcoin held its ground largely because much of the expected downside had already been priced into the market
Taking Away Some Accommodation
The Fed’s 25bp increase, taking the policy rate to 3.75%–4.00%, was already more than 90% priced in before the meeting. The actual hike was therefore not the important part. The bigger signal came from Chair Warsh’s commentary.
Warsh said inflation was still “too high” and had remained there for too long. He also argued that recent summer inflation data did not show any meaningful improvement in the underlying trend. More importantly, he said he would be “hard-pressed to describe” current financial conditions as restrictive. He described the hike as “removing a dose of policy accommodation,” which makes it clear that he does not view current policy as especially tight
He also avoided giving markets the usual forward guidance, saying plainly, “I’m not in the forward guidance business.”
The decision itself was unanimous. The new policy statement also removed July’s references to energy-related supply shocks, effectively dropping that explanation for the inflation pressure. There were no dissenting votes
More of a Recalibration Than a New Campaign
The latest FOMC projections showed that officials remain divided over what comes next. Two members see no further rate moves in 2026, twelve expect one more increase, and four expect two additional hikes. That puts the 2026 median at 4.00%–4.25%.
Rates then remain unchanged through 2027 before the easing cycle begins. Warsh did not submit a dot projection, which fits with his broader reluctance to provide explicit forward guidance.
The more important change may have been buried deeper in the projections. The Fed lifted its longer-run neutral rate estimate from 3.06% to 3.25%. In other words, officials now believe the economy can operate with a structurally higher neutral policy rate. That matters for long-duration Treasury valuations and may be more important over time than the exact path of rates over the next few meetings
Futures markets subsequently priced the policy rate around 4.2% by December 2026 and roughly 4.6% by September 2027
The Yield Curve Tells the Story
Wednesday’s reaction looked like a classic bear flattening. The 2-year Treasury yield jumped about 7bp while the long end barely moved. The dollar gained roughly 0.5%, equities dropped around 600 points, and gold fell 0.69% to about $4,263
The initial reaction suggested investors were interpreting the Fed’s move and messaging as a signal that tighter policy could last longer than previously expected
Thursday brought a different reaction, even though the Fed’s underlying message had not changed. Treasury yields declined across the curve. The 2-year finished at 4.73%, the 30-year at 5.34%, and the 10-year returned to 4.943% after briefly touching 5.04% on Tuesday, its highest level since 2007
There is an important takeaway here. The front end initially repriced for a higher number of future hikes, while the long end eventually benefited from the Fed showing that it was willing to remain disciplined. In practical terms, a rate hike today can reduce the number of hikes markets expect tomorrow.
Warsh also pointed to another factor worth watching in the Treasury market: competition from corporate bond issuance. Large technology companies are increasingly tapping debt markets to finance spending, particularly AI infrastructure. Hyperscalers have already issued about $194 billion of debt this year, compared with $108 billion during all of 2025. Warsh specifically highlighted AI capital expenditure as a factor that could influence Treasury yields.
Oil Is Giving Back Risk Premium
Crude prices fell for three straight sessions after the FOMC meeting. Brent slipped to $103.83 while WTI dropped to $101.01
Saudi Arabia said it could restore roughly half of the damaged East-West pipeline capacity within days and return the system to full operation within six weeks. Additional oil has also been moved toward Asian refiners through ship-to-ship transfers near Sohar. US Energy Secretary Wright called the disruption “brief and temporary,” measured in days, and said around 18 million barrels of crude and petroleum products had moved through the Strait of Hormuz during the week
Independent analysts are taking a more cautious view. Satellite imagery suggests the pumping station hit on September 11 suffered significant damage, with some estimates pointing to weeks rather than days for a full recovery. Additional Saudi Houthi incidents were also reported on Friday
WTI is still up more than 18% for the month, so the recent decline looks more like a partial unwind of the geopolitical premium than evidence of a major improvement in physical supply. The market has lowered its estimate of how much supply is actually at risk, but the amount of oil physically moving has not changed materially yet
BOJ Hikes, Yen Still Falls
The Bank of Japan raised its policy rate by 25bp to 1.25%, the highest level since 1995. The decision passed 7-2, with Asada and Sato dissenting
Despite the hike, the yen weakened 0.45% to 156.64, while the 10-year Japanese government bond yield fell 4.9bp
That looks like another buy the rumor, sell the fact reaction. A 25bp BOJ hike is no longer enough on its own to support the currency when the Federal Reserve is tightening at the same time. Economists currently expect the BOJ to reach 1.5% by the end of March 2027
The SEC Moves Where Congress Didn’t
The failed CLARITY Act vote grabbed the headlines, but the SEC made a regulatory move that could ultimately have a bigger impact on market structure
SEC Chair Atkins used Section 36(a)(1) authority to issue exemptive relief allowing Tokenized Securities Venues to trade tokenized stocks through permissioned automated market makers without registering as exchanges
The exemption is effective immediately and lasts five years. The SEC explicitly positioned the move as a response to the lack of Congressional action on the issue. Synthetic assets are excluded, and issuers have 30 days to object
Tokenized US Treasuries are already the biggest part of the tokenization market, representing around $15 billion. The DTCC is also preparing to launch a service covering Treasury bills, notes, and bonds next month
The important caveat is durability. Regulatory relief from the SEC does not carry the same permanence as legislation, and SEC officials have previously argued that Congressional action would provide a more durable framework through future regulatory changes.
Key Dates Ahead
Thu, Sep 24: Xi Trump summit
Wed, Sep 30: Q3 GDP third estimate and BEA annual revisions
Fri, Oct 2: Non-Farm Payrolls
October: DTCC tokenization launch, Q3 earnings, and hyperscaler AI capex guidance
Tue, Nov 3: US midterm elections
Tue–Wed, Dec 8–9: FOMC meeting
Ongoing: East West pipeline restart, Yanbu loadings, and Hormuz transit developments
Do you think Bitcoin can keep holding up with the Fed leaning higher for longer?
