On October 8 Beijing Time, the Federal Reserve released the minutes of the Federal Open Market Committee (FOMC) monetary policy meeting held on September 15–16.
The recently released meeting minutes have brought the Fed back into the framework of “first bring down inflation”: rate hikes have already been implemented, and most participants still view one additional hike before year-end as their baseline—according to the minutes, all participants supported the September 25-basis-point rate hike, and most believed that further rate increases this year could be appropriate, though an October hike was not deemed necessary.
Following the release of the minutes, risk assets led the decline, with BTC dropping as low as $82,300 this morning before recovering to $83,000; most other altcoins have fallen more than 3%.
Data shows that spot ETFs have continued to experience net inflows following the interest rate hike, with Bitcoin spot ETFs recording $2.6 billion in net inflows in September—the second-highest monthly net inflow this year, after approximately $3.52 billion in August—indicating that institutional demand has not withdrawn, and the outlook remains positive.
What did the minutes say?
At the September 15–16 meeting, the FOMC unanimously raised the target range for the federal funds rate by 25 basis points to 3.75%–4.00%, marking the first rate hike since July 2023. The minutes further noted that all 19 participating officials supported this decision. Most participants assessed that another increase in the target range before the end of the year could be appropriate, while emphasizing that each meeting remains data-dependent, with future moves contingent on incoming data and its implications for the economic outlook and the balance of risks.
Inflation is at the core of this shift. Staff estimated the overall PCE for August at approximately 3.8% and core PCE at around 3.4%, with insufficient progress on lowering inflation in recent months, and risks nearly uniformly tilted to the upside. Key drivers include energy prices and tariffs stemming from geopolitical factors, as well as investment, input costs, and prices of technology-related goods tied to AI infrastructure development. Economic activity continues to expand at a solid pace, consumption remains resilient, the unemployment rate is around 4.1%, and the labor market is near full employment. Several participants even judged that the policy rate prior to any rate hikes was “not restrictive or only slightly restrictive.” A higher path for interest rates is viewed by some as insurance against persistent inflation and by others as a necessary step under the baseline outlook.
Polymarket data shows that the probability of maintaining interest rates unchanged in October has reached 84%, up 35% over the past week; the probability of one more rate hike before year-end remains above 70%. In other words, this minutes release confirms a "bias toward tightening within the year," not a "must-hike in October."
For risk assets, pressure does not stem solely from rate hikes themselves, but from interest rates remaining elevated for longer. If nominal and real interest rates stay high due to expectations of further hikes, the theoretical valuations of long-duration assets, high-valuation growth stocks, and crypto assets will come under pressure. Yields on U.S. Treasuries from 2- to 10-year maturities have collectively risen by approximately 35 basis points. Financial conditions have not tightened broadly—equities remain high and credit spreads remain narrow—but the minutes explicitly treat “financial conditions still supporting growth” as part of the inflation risk, not merely an irrelevant backdrop.
The minutes did not describe a recession, but rather strong investment, stable employment, and elevated inflation. Under this combination, risk assets will not be bought due to "recession trades" nor due to "unlimited easing." The market is pricing in: the economy can still withstand higher interest rates, and policy will go one step further toward the 2% target. For high-beta assets, volatility stems from data, not from unexpected policy shifts.
After the interest rate hike was implemented, crypto ETFs are still being bought.
Interestingly, institutional demand in the crypto market does not appear to have diminished due to interest rate hikes.
According to SoSoValue data, U.S. spot Bitcoin ETFs recorded net inflows of approximately $2.65 billion in September, with nearly all of this occurring after the interest rate hike on September 16: net outflows of about $750 million were recorded over the two days prior to the hike, while net inflows of approximately $2.9 billion occurred from September 17 through month-end. The week ending September 25 saw inflows of about $2.4 billion—the largest weekly inflow since October 2025—with nearly $1 billion flowing in on September 21 alone. BlackRock’s IBIT was the primary driver. During the same period, spot Ethereum ETFs also recorded net inflows of approximately $690 million. Bitcoin’s price rose from around $78,500 at the start of the month to near $83,000, and has since traded in a range around $84,000.
The longer time frame also indicates that the allocation was not interrupted by the rate hike. In mid-July, the year-to-date net outflow from Bitcoin spot ETFs reached approximately $5.8 billion; one week after the September rate hike, the annual net flow turned positive again. By early October, the cumulative net inflow since the product’s launch reached approximately $57.8 billion, with total assets under management around $110 billion. Since October, daily flows have become more volatile—on October 6, net inflows still amounted to approximately $120 million, and some tracking data shows a net inflow of about $3.5 billion over the 30-day window—but the trend established in September was clear enough: a fully priced-in 25-basis-point hike was not a trigger for institutional outflows.
This contradicts the traditional intuition that "rate hikes mean selling risk," because the probability of a rate hike was already above 90% before the decision, with outflows concentrated before the announcement; after the decision, uncertainty decreased, triggering simultaneous short covering and inflows of allocation capital. Buying occurred in regulated spot ETFs, corresponding to actual Bitcoin subscriptions rather than leveraged futures; this type of capital is less sensitive to a single 25-basis-point move than to whether the regulatory channel remains stable or whether non-correlated assets are needed in the portfolio.
It's not a loose trading strategy; it's an "affordable rate hike" trade.
The minutes showed that most officials still believed another hike was appropriate, and some felt current rates were insufficiently restrictive. If the October 14 CPI or subsequent employment data reassert inflation persistence, pricing for a December rate hike would quickly rebound, pressuring high-beta assets through higher real rates and a stronger dollar. In such a scenario, crypto typically first prices in liquidity expectations before its own supply and demand dynamics; ETFs can provide some buffer but cannot hedge against a sharp rise in risk-free rates.
Currently, the probability of maintaining interest rates unchanged in October has become significantly higher than in the initial days following the meeting, creating a data vacuum for risk assets. More importantly, September’s ETF flows demonstrate that, when growth has not stalled, rate hikes are already priced in, and the spot market remains open, institutions treat Bitcoin as an allocable asset rather than merely a hedge against easing. Spot products like Ethereum and Solana also recorded net inflows during the same week, indicating this is not a short-term cover for a single asset.
Next, we need to monitor whether three sets of data move in the same direction: whether PCE/CPI remain above 3%, locking in a December rate hike; whether financial conditions genuinely tighten due to rising U.S. Treasury yields; and whether spot ETFs continue to maintain net inflows even as Bitcoin approaches holders’ cost basis.
If only interest rates rise and cash flows turn negative, the narrative that risk assets can withstand rate hikes will fade. If inflation shows marginal easing, a pause is confirmed in October, and monthly ETF flows remain positive, crypto is more likely to trade on demand for allocation following reduced volatility, rather than on expectations of a new round of significant easing.