Jim Bianco on the Fed's Rate Hike, Bond Market Signals, and Bitcoin Adoption

The Fed Hikes as Bond Market Warned for Two Years

The Federal Reserve raised interest rates for the first time in more than three years. Jim Bianco of Bianco Research says the bond market had been signaling that this move was necessary for two years. In a conversation with Grace Remington and Sean Hagan, Bianco shared his outlook on macro conditions and discussed Bitcoin adoption and broader crypto themes.

Key Points from the Interview

• The Fed raised rates for the first time in over three years.
• Bianco says the bond market signaled this was needed for two years.
• The ten-year yield rose from 3.7% to 5% during the Fed's cutting cycle.
• The October 28 rate decision, coming one week before the midterms, matters more than Wall Street thinks, according to Bianco.
• The conversation covered topics including Bitcoin ETF developments, stablecoins, the GENIUS Act, and Fourth Turning dynamics.

An Unusual Bond Market Signal

Bianco pointed out that during the Fed's cutting cycle, the ten-year Treasury yield rose from 3.7% to 5%. He noted this is the first time in over 50 years that long-term yields climbed while the Fed was cutting rates. He explained what he would need to see in the long end of the yield curve before concluding that the Fed has regained credibility with bond investors.

The October 28 Decision and the Midterms

Bianco argued that the Federal Reserve's October 28 decision, which came one week before the midterm elections, carries more significance than Wall Street may appreciate. The timing of policy moves around major political events is a factor he believes markets are underweighting.

Bitcoin, Stablecoins, and Broader Crypto Themes

The conversation touched on several crypto-related topics. Bianco discussed what Bitcoin needs to demonstrate in terms of development activity and why the Bitcoin ETF buildout may have missed the mark. He also addressed stablecoins and the GENIUS Act, including how stablecoin demand could create real Treasury demand. Additionally, he explained why Tether functions effectively as a currency in countries like Venezuela and Afghanistan.

The Fourth Turning and Broader Macro Context

Bianco connected current events to the concept of the Fourth Turning, discussing how multiple wars, port disruptions, and post-pandemic economic conditions shape the current moment. He pushed back on the debasement trade narrative and on some of Federal Reserve Chair Jay Powell's claims about the post-COVID economy.

Sources

• Bitcoin Magazine

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