Can Record Money Supply & Strong ETF Demand Offset Rising Treasury Yields & a Hawkish Fed?

Bitcoin is rising modestly on Tuesday as investors weigh surging yields and hawkish Fed expectations against increased liquidity, as global and US money supply hits record levels.

The largest cryptocurrency is trading around $84,000, having recovered from a low of $82.5K yesterday. BTC is up 1.7% over the past 24 hours. Ethereum is also up over 2.5%, recovering from yesterday's losses.

US Treasury yields keep climbing

Crypto markets were spooked yesterday by a surge in Treasury yields as markets priced in expectations for further interest-rate hikes from the Federal Reserve. The benchmark 10-year Treasury yield rose to a fresh 19-year high of 5.27%. This comes after the Fed raised rates by 25 basis points this month and pointed to further rate hikes this year in the face of sticky inflation.

Adding to inflationary concerns, oil prices have risen sharply this week amid fading optimism about a diplomatic solution between the U.S. and Iran. Over the weekend, Trump rejected Iran's peace proposal, while Brent trades above $100 a barrel.

Core PCE data, the Fed's preferred gauge for inflation, will be released tomorrow. Expectations are for the annual rate to rise to 3.4%, up from 3.3%. Hotter-than-expected inflation could cement October rate-hike expectations, which currently sit at around 70%, up sharply from 50% a week ago.

Yet, despite this challenging backdrop, Bitcoin is showing resilience. This comes as Bitcoin ETF demand remains solid, Strategy continues to accumulate BTC and U.S. liquidity hits a fresh record high.

US and Global money supply hit record levels

U.S. M2 money supply, which measures money held in relatively liquid forms such as currency, bank deposits and retail money-market funds, rose to a record $23.34 trillion in August, up around 5.7% year on year. This marked at $124.9 billion increase in August and M2's 28th consecutive monthly increase. Global money supply reached a record $103 trillion in August.

Growing money supply could support demand for Bitcoin if investors move more capital into risk assets. However, M2 growth alone does not guarantee a rally.

A larger money supply gives households, companies and investors more capacity to buy assets. But with the Fed raising rates to 3.75%-4% in September and Treasury yields elevated, yield-paying bank accounts and money-market funds are competing with Bitcoin for investors' attention.

Still, institutional demand remains solid, with BTC ETFs recording their biggest inflow since October 2025 when BTC reached a record high. Last week, BTC ETFs attracted $2.39 billion in inflows, raising optimism that Bitcoin could be heading towards a strong fourth quarter.

Q4 seasonality tailwind

The final quarter is often a strong one for digital assets. According to CoinGlass, Bitcoin's average Q4 return since 2013 is 77%, compared with 45% in Q1, 24% in Q2 and 8% in Q3. However, Q3 has also been notably strong for Bitcoin, with the cryptocurrency up 43%. The key question is whether growing liquidity and institutional demand can offset the pressure from higher yields and a more hawkish Fed.

Bitcoin Technical Analysis

After running into resistance at an eight-month high of $87.3K, Bitcoin has eased back and is consolidating around $84K, close to the 23.6% Fibonacci retracement of the $126K high and $57.7K low.

Despite the pullback, the bias remains bullish, with BTC trading well above the 50-, 100- and 200-day EMAs. The RSI also remains above 50, keeping buyers hopeful of further upside.

Buyers will look to rise above $87K to open the door to $90K, followed by $92K, the 50% Fibonacci retracement, before attention turns to $100K.

On the downside, support can be seen at the 50 EMA around $77.5K, ahead of $74K, the 23.6% Fibonacci retracement and 200 EMA. Below here, sellers could gain traction towards $70K. 

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