Market Commentary

ACTIVITY AND INFLATION: THE ECONOMY GIVES THE FED ROOM

The week's macro data point was business activity. The composite PMI — a survey of firms measuring the economy's expansion — jumped to 58.4 in September, its highest since July 2021, with strength in both manufacturing and services and input prices rising at their fastest pace since 2022. In other words, the economy is growing strongly and cost inflation is reaccelerating.

For Digital Assets, the implication is adverse in the short term. A robust economy gives the Fed room to keep hiking without fear of stalling it, and Governor Michael Barr confirmed as much, saying further policy adjustments are "likely" needed to return inflation to target. The reaction was immediate: the market went from assigning less than 60% to an October 28 hike to more than 70% within days. Of the Fed's 18 members, only two do not expect another hike this year. The scenario shifted from "will they hike" to a settled "they hike again."

THE TREASURY AUCTION AND RATES

The tightening was felt most clearly in the bond market. On Wednesday, the Treasury sold USD 70,000MM in 5-year notes with the weakest demand since 2018: for each dollar offered only USD 2.21 in orders arrived (against an average of 2.33), and primary dealers, obliged to bid, had to absorb about 16% of the issue — double the usual. The 5-year yield topped 5% for the first time since 2007. When demand falls short, the Treasury pays more to finance itself and the cost of money rises for everyone: between September 18 and 24, the 2-year note went from 4.76% to 4.87%, the 10-year (the reference for mortgages and credit) from 5.01% to 5.18%, and the 30-year from 5.34% to 5.47%.

The transmission to BTC is direct. BTC pays no coupon: the more a government bond yields, the less attractive it is to wait for the appreciation of a non-yielding asset. High rates also strengthen the dollar — now at a two-month high — and raise the cost of the credit that finances leveraged positions. And when rates jump, investors cut risk across the board at once: on auction day, the S&P 500 fell 0.75% and BTC 2.1%. ETF buying provides support, but as long as rates rise, they set the ceiling.

GEOPOLITICS AND OIL

Oil rose again after the prior week's respite. At the UN General Assembly, the U.S. and Iran held their first talks in months on Tuesday, but without a deal; Secretary of State Rubio warned that Trump keeps military options open. On Thursday, Iranian foreign minister Araghchi presented a plan to reopen the Strait of Hormuz in seven days, conditioned on the U.S. lifting the blockade and sanctions. That same day, Saudi Arabia intercepted Houthi missiles aimed at Yanbu — its alternative export port to Hormuz. Brent closed Thursday at USD 106.60, up 3.4% on the day.

The transmission chain is the same we have been describing: straits, oil, yields, inflation, Fed. As long as Hormuz lacks a negotiated exit, oil remains the main channel through which geopolitics feeds inflation and constrains the Fed.

REGULATION: PROGRESS THROUGH THE REGULATORS

With Congress stalled, regulation advanced administratively and — most healthily — with public consultation. The SEC opened for comment the possibility of making permanent its exemption to trade tokenized stocks; the CFTC sent the White House two rules for Digital Asset markets for review; and on Thursday the Fed opened for consultation the rules for banks that issue stablecoins (dollar-backed digital coins). It is a slower process than a law, but with more legitimacy through public comment.

A reconsideration of our read from last week is also in order: the CLARITY Act is not dead. A motion to reconsider was filed in the Senate, though still without a new scheduled vote; the electoral calendar pushes its possible passage toward the year-end session or even 2027. It is still alive, but its path is longer than the industry had hoped.

Bitcoin (BTC): Trades at USD 83,500 (+3.2%), after a breakout week. BTC reached USD 86,579 Monday — driven by the record ETF inflow — and now trades near USD 83,500, but the underlying point is structural: it cleared the USD 80,800–83,300 zone that had been the barrier in prior weeks, where 1.32 million bitcoin hold their cost basis. That supply wall, once cleared, flips to support. The advance rests on real spot demand, not leverage, which lends it solidity; the late-week pullback responded to the jump in rates, not to any intrinsic weakness. Support at USD 80,800–83,300; resistance at USD 86,600 and, above, the psychological USD 90,000 zone.

Ethereum (ETH): Trades at USD 2,680 (+2.7%), recovering the institutional backing it had lost the prior week: its ETFs returned strongly (+USD 602.8MM), reversing the earlier net outflow. The asset tracked BTC's advance and consolidated above USD 2,650. The signal of institutional participation in ETH is back in place, though it needs to hold to confirm a trend. Support at USD 2,600–2,650; resistance at USD 2,780–2,900.

Solana (SOL): Trades at USD 120.00 (+7.1%), the best performance of the three for a second straight week. The advance rested on a solid ETF flow (+USD 101.4MM) and the momentum it carries from the break above USD 100. SOL cleared the USD 113 zone we had flagged as resistance and now trades in new territory; worth watching whether it consolidates above USD 120 or marks a profit-taking zone. Support at USD 112–115; resistance at USD 124–130.

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Market structure accompanied the breakout without signs of excess. The advance rested on spot buying — the ETFs and bitcoin leaving exchanges — more than on speculative leverage, which lends it resilience. On-chain, the signal turned constructive: after a week of inflows, this week a net ~26,000 bitcoin left exchanges, an accumulation pattern in which demand pulls coins off the market.

The Treasury auction episode left a lesson in correlation: when rates jump, BTC moves like just another risk asset. On auction day it fell 2.1% in line with the S&P 500, a reminder that, in the short term, price responds to the rate cycle as much as to its own flows. Institutional demand cushions, but does not insulate.

A risk reminder came from another front: on Thursday, the Bitget exchange suffered the theft of some USD 352MM from its operational (hot and warm) wallets, via spoofed transfers — not through a compromise of cold-custody private keys. Bitget paused withdrawals and said its protection fund, of more than USD 464MM, covers the loss. The case, possibly the largest hack of 2026, underscores one of the reasons Solidus prioritizes segregated institutional custody: keeping assets on an exchange concentrates an operational risk that professional custody is designed to avoid.

Expected volatility for the week ahead: high. The calendar brings employment and inflation data on the way to the October 28 FOMC, new Treasury auctions, and the Hormuz negotiation. With the Fed leaning to hike and oil under tension, any of these fronts can move price forcefully.

BTC: +USD 2,251.30MM, the largest weekly inflow in almost a year and the week's central data point. Monday marked USD 999MM in a single day — the largest daily inflow since October 2025 — followed by USD 714.7MM Tuesday, USD 346.9MM Wednesday and USD 190.7MM Thursday. It is broad buying, led by BlackRock's IBIT and Fidelity's FBTC, and sustained across the whole week. This is the signal we had been waiting for: not an isolated spike, but consistent institutional demand confirming that the rebound rests on real spot buying. It is the floor holding price up against the ceiling of rates.

ETH: +USD 602.80MM, a decisive turn after last week's net outflow. The funds took in strongly all four days, led by BlackRock's ETHA and Fidelity's FETH. Institutional participation in ETH, which had not confirmed last week, returned clearly. It is a development to watch: if the flow sustains, it reactivates the relative-allocation thesis in ETH's favor.

SOL: +USD 101.40MM, the third straight week of positive flow and the most forceful, concentrated in Bitwise's BSOL and Fidelity's FSOL. Institutional interest in SOL is taking hold and tracks its price leadership. The sustained pattern is starting to look more like a structural allocation than a one-off interest.