Fed meeting next week: What it could mean for Bitcoin

Why Bitcoin is heading into Fed week at $80,000

The week started with US spot Bitcoin (BTC) ETFs taking in more than $1 billion from Monday to Wednesday and BTC climbed toward $85,000.

But on Thursday, the Nasdaq fell 2.6%, its worst day since June, as investors questioned whether the AI spending boom has peaked. Meta shares dropped about 7% despite beating revenue forecasts and Tesla trimmed its spending plans for the year. 

Global hedge funds had their worst day since the COVID-era rout.

Reports of planned hostility between US, Israel and Iran after the midterm elections added to the nerves. BTC fell to a low near $80,989 and more than $470 million in leveraged positions were wiped out within 24 hours. ETF investors pulled $636 million on Thursday, the biggest single-day outflow since June.

BTC spent Friday in a tight range around $81,500, ending the week roughly where it started and slipped to around $80,800 by Saturday morning in Asia.

What is the Fed expected to do?

Hold. The Fed raised its benchmark rate to a range of 3.75% to 4.00% in September and almost no one expects a second move on Wednesday. In a Reuters poll, 94 of 100 economists said the Fed will stay put in October. Futures markets put the odds of an October hike at about 5%, down from more than 50% right after last week's hot inflation data.

Every economist in the same Reuters poll expects a hike at the December meeting and futures imply roughly 90% odds of one by year-end. That means the most important part of Wednesday may be the tone of the statement and of Fed Chair Kevin Warsh's press conference.

Why oil may decide the December call

Brent crude settled at $116.72 a barrel on Friday, a six-month high and its third straight weekly gain, after reports of the Houthi attacks on Saudi energy infrastructure. US crude closed at $103.44.

This is on the Fed’s radar as gasoline was the biggest driver of September's hot consumer inflation print. Another month of high fuel prices may make it harder for inflation to cool before the December meeting.

What could move Bitcoin after Wednesday

1. A hawkish tone

If Warsh signals that December is all but locked in, or that more hikes may follow, BTC may come under pressure, as it has every time hike talk has picked up this year. Higher rates make cash and bonds more attractive next to assets that pay no yield.

2. A sign of patience

If the Fed leaves the door open to waiting, it may ease some of the pressure on risk assets. Treasury yields have already pulled back, with the 10-year yield near 4.99%, below the 5.34% peak it hit in late September.

3. Whether the ETF bid sticks

This week showed demand hasn't disappeared. Monday and Wednesday each brought in more than $520 million. The question is whether that money comes back after the Fed, or whether Thursday's exit was the start of another run of outflows.

What to watch next

📊 Markets recap

Crypto

• BTC: $80,800 to $85,000, trading near $80,800 after failing to hold above $84,000 mid-week
• ETH: $2,350 to $2,500, trading near $2,380 after a brief dip toward $2,357 on Thursday
• SOL: $100 to $109, trading near $102 after a sell-the-news drop following the Alpenglow upgrade
• XRP: $1.29 to $1.38, trading near $1.29 and pressing on the $1.30 support it tested on Thursday

Token anomaly: Privacy coin Monero (XMR) jumped about 20% on the week to just below $650, its highest level since January, while most of the market fell. It gave back part of the gains on Friday, slipping to around $607.

Spot ETF flows

US spot Bitcoin ETFs took in about $301 million for the week ending October 23, per SoSoValue, breaking a two-week run of outflows. Monday and Wednesday brought in $527 million and $525 million, before $636 million left on Thursday and another $138 million on Friday. Spot Ether ETFs lost about $225 million from Monday to Thursday, with Wednesday's $15 million the only day of inflows.

Equities

• S&P 500: 7,624, down 0.5% on Friday and about 0.5% on the week, its second straight weekly loss
• Nasdaq Composite: 25,955, down 0.2% on Friday after a 2.6% drop on Thursday, its worst day since June
• Dow: 52,215, down 1.2% on Friday but still up about 0.4% on the week, the only major index to gain
• Meta fell about 7% on Thursday despite beating revenue forecasts, as investors weighed its AI spending plans
• Apple briefly overtook Nvidia as the most valuable US company on Friday, with both worth about $5.1 trillion, before Nvidia reclaimed the top spot
• SpaceX rose after beating third-quarter forecasts, with revenue of $14.58 billion and connectivity revenue up 69% to $5.2 billion (more on its merger talks with Tesla below)

Commodities

• Gold: $4,010 to $4,200/oz, trading near $4,020 after a weekly loss of about 3.5% as higher oil revived rate-hike worries
• Oil: Brent at $110 to $117, WTI at $97 to $104, with Brent settling at $116.72 and WTI at $103.44 on Friday

🔋 SpaceX and Tesla merger talks could create a 30,000 BTC treasury

Elon Musk confirmed on Tuesday that SpaceX and Tesla are exploring a merger. Speaking on SpaceX's third-quarter earnings call, he said: "Do I think it would be a good idea, yes. But at the end of the day, the shareholders have to be supportive of this."

Both companies have set up committees of independent directors to study a deal and Musk is barred from their discussions because he holds large stakes in both. He said the committees "have not reached agreement on the terms of any transaction." No price or structure has been disclosed.

SpaceX reportedly holds 18,712 BTC and Tesla 11,509 BTC, so a combined company would own about 30,221 BTC, worth roughly $2.4 billion at current prices. That would make it one of the largest corporate Bitcoin holders, though still far behind Strategy's 848,517 BTC.

🏦 Big banks bring stablecoins closer to everyday users

1. HSBC put a stablecoin in 3.3 million pockets

The bank launched RedCoin, a Hong Kong dollar stablecoin, on its PayMe app on Friday. Users can activate a wallet over the coming days with no minimum balance or new account, send RedCoin to friends instantly and pay at more than 100,000 merchants. Each token is backed by segregated, highly liquid assets and can be redeemed one-for-one for Hong Kong dollars.

HSBC plans to add a stablecoin wallet to its Hong Kong banking app later this year, starting with a tokenized share class of its Hong Kong dollar money market fund from HK$100. It's one of the first times a global bank has offered a stablecoin to this many retail customers at once.

2. JPMorgan brought JPM Coin to Ethereum

The bank extended its US dollar deposit token to the Ethereum network on Monday. Each JPM Coin is a claim on a dollar held at JPMorgan, and transfers can settle around the clock, including weekends. Access is limited to approved institutional clients.

🟣 Solana's Alpenglow goes live as Ethereum's next upgrade slips

Solana's Alpenglow upgrade went live on Wednesday, replacing the system the network had used to confirm transactions since its 2020 launch. Anza, the developer behind the upgrade, says finality, the point at which a transaction can't be reversed, has dropped from about 12.8 seconds to roughly 150 milliseconds. Anza CEO Brennan Watt called it "the largest, most ambitious blockchain upgrade since 'The Merge.'"

Ethereum had a rougher week. A planned test of its Glamsterdam upgrade on the Hoodi test network, set for October 26, was postponed after developers found a security issue that could put existing smart contracts at risk. No new date has been set, which may push the mainnet launch further out.

💼 Who's still buying crypto?

1. Strategy kept buying in small amounts

Michael Saylor's company added 267 BTC for about $22.1 million at an average of $82,900, lifting its holdings to 848,517 BTC. Once again, it spent far more, about $193 million, buying back its own preferred shares, and its board raised the buyback authorization from $2 billion to $3 billion. Shareholders vote on the dividend rate for those preferred shares on October 28.

2. Bitmine is 99% of the way there

Tom Lee's Bitmine bought another 12,535 ETH, bringing its total to 6,041,481 ETH, or 4.9% of all Ether in circulation. The company says it's now "99% of the way" to its goal of owning 5%.

🗓️ What's ahead

• October 26: Bitmine's weekly ETH holdings update
• October 27 to 28: Fed policy meeting, with the rate decision and Warsh's press conference on October 28; Strategy shareholders vote on its preferred share dividend rate
• October 28: Alphabet and Microsoft report third-quarter earnings after the close
• October 29: European Central Bank rate decision; Amazon reports after the close
• October 30: Bank of Japan rate decision; roughly $11.7 billion in BTC options expire

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