Bitcoin recovers as lower US yields offset weak ETF demand

Market comment on behalf of Ranim Turfa Head of Research and Market Analysis – MENA at Tickmill

Bitcoin advanced on Wednesday, recovering overnight losses as results showed Democrats taking control of both chambers of Congress. The prospect of a divided government raised concerns that fiscal gridlock could constrain federal spending and weigh on growth, pushing Treasury yields and the US dollar lower and easing pressure on non-yielding assets, including Bitcoin. Markets still expect another Federal Reserve interest rate increase at the next meeting but have scaled back bets on further tightening through mid-2027.

Monetary policy outside the US could limit that support. Monthly Eurozone inflation slowed to 0.4%, but the annual rate rose to 4%, reinforcing expectations of further tightening from the European Central Bank. In the UK, markets expect the Bank of England to deliver its first interest rate increase in several years tomorrow. Tighter monetary policy across major economies could keep global bond yields elevated and cap Bitcoin’s recovery.

Institutional demand has yet to confirm the rebound. Spot Bitcoin ETFs recorded net outflows of USD 115 million on Tuesday, a third consecutive session of withdrawals, bringing cumulative outflows over that period above USD 1.1 billion. Without a return to inflows, the recovery depends heavily on lower yields and could stall if they rebound.

The election result also clouds the regulatory outlook. A Democratic-controlled Congress could push for stricter oversight of digital assets and slow legislative progress.

This week’s ISM services survey and nonfarm payrolls report will test whether the shift in interest rate expectations holds. Strong data could revive bets on further Fed tightening, lifting yields and the dollar and putting renewed pressure on Bitcoin. Weaker readings would deepen concerns over US growth and could extend the decline in yields, offering further support. Markets will also be closely monitoring geopolitical developments in the Middle East and their effect on oil prices and inflation expectations.

Zaid Barem / ymm