Fed minutes keep the door open to another hike; crypto spot ETFs pull in $2.6B net inflows in September

The Federal Reserve published the minutes from the September 15–16 FOMC meeting at 8:00 a.m. Beijing time on October 8, reinforcing the policy backdrop of "inflation first". Officials have already delivered a hike, and the minutes show most participants still view one additional increase before year-end as the baseline. All participants backed the 25-basis-point move, and most said further increases this year could be appropriate, though an October hike was not seen as necessary. Risk assets weakened after the release. Bitcoin briefly slid to around $82,300 this morning before rebounding to roughly $83,000, while most major altcoins fell more than 3%. At the September meeting, the FOMC unanimously raised the federal funds target range by 25 basis points to 3.75%–4.00%, the first hike since July 2023. The minutes note all 19 participating officials supported the decision. Most participants judged another increase before year-end could be appropriate, while stressing a meeting-by-meeting, data-dependent approach tied to incoming data, the economic outlook, and the balance of risks. Inflation remains the central concern. Staff estimates put August headline PCE at about 3.8% and core PCE near 3.4%. The minutes cite insufficient progress on disinflation in recent months, with risks broadly skewed to the upside. Contributors include energy prices and geopolitically driven tariffs, along with higher investment and input costs and rising prices for AI infrastructure-related technology goods. The broader economy is still described as solid: activity continues to expand at a healthy pace, consumption is resilient, the unemployment rate sits around 4.1%, and the labor market is near full employment. Several participants assessed that the policy rate prior to any hikes was "not restrictive or only slightly restrictive." Some officials framed a higher-for-longer rate path as insurance against persistent inflation; others saw it as a straightforward implication of the baseline outlook. Markets are leaning toward a pause in October. Polymarket data shows the probability of no change in October at 84%, up 35 percentage points over the past week. The probability of one more hike before year-end remains above 70%. Put simply, the minutes underline a tightening bias within the year, not a requirement to hike in October. For risk assets, the bigger headwind is not a single hike but the prospect that rates stay elevated for longer. Persistently high nominal and real rates pressure theoretical valuations for long-duration assets, high-multiple growth stocks, and crypto. U.S. Treasury yields across the 2- to 10-year sector have risen by roughly 35 basis points. While equities remain elevated and credit spreads tight, the minutes explicitly treat "financial conditions still supporting growth" as part of the inflation risk, not a neutral backdrop. The minutes do not paint a recession scenario; they emphasize strong investment, steady employment, and stubborn inflation. In that mix, risk assets are unlikely to benefit from either "recession trades" or expectations of broad-based easing. The market message is that the economy can tolerate higher rates and policy may need to take another step toward the 2% target. For high-beta assets, volatility is likely to hinge on data, not surprise policy pivots. Notably, crypto ETF demand has remained firm even after the hike. SoSoValue data show U.S. spot Bitcoin ETFs recorded about $2.65 billion of net inflows in September, with nearly all of it coming after the September 16 hike: roughly $750 million of net outflows occurred in the two days before the decision, followed by about $2.9 billion of net inflows from September 17 through month-end. The week ending September 25 saw around $2.4 billion of inflows, the largest weekly haul since October 2025, including nearly $1 billion on September 21 alone. BlackRock's IBIT led the buying. Over the same period, spot Ethereum ETFs posted net inflows of about $690 million. Bitcoin rose from roughly $78,500 at the start of September to near $83,000, and has since traded in a range around $84,000. Longer-horizon flow data also suggest allocations were not disrupted by the hike. In mid-July, year-to-date net flows for Bitcoin spot ETFs were down about $5.8 billion; one week after the September hike, the year-to-date figure turned positive again. By early October, cumulative net inflows since launch reached about $57.8 billion, with total assets under management around $110 billion. Since October, daily flows have turned choppier. On October 6, net inflows were still about $120 million, and some trackers show roughly $3.5 billion of net inflows over the past 30 days. Even so, September delivered a clear signal: a fully priced-in 25-basis-point hike did not trigger institutional selling. That runs against the old "hikes mean sell risk" reflex. The market had already assigned more than a 90% probability to a hike ahead of the decision, and outflows clustered before the announcement. Once the decision arrived, uncertainty fell, helping spur short covering alongside fresh allocation flows. Importantly, the buying showed up in regulated spot ETFs tied to actual Bitcoin subscriptions rather than leveraged futures. This capital tends to be less sensitive to a single 25-basis-point move than to the stability of the regulatory channel and the role of non-correlated assets in portfolios. It is less a momentum trade than a "manageable hike" trade. Looking ahead, the minutes indicate most officials still lean toward another hike, with some arguing current rates are not restrictive enough. If the October 14 CPI or subsequent labor data reassert inflation persistence, December hike pricing could rebound quickly, pressuring high-beta assets via higher real rates and a stronger dollar. In that setup, crypto often trades liquidity expectations first; ETFs can cushion flows but cannot offset a sharp move higher in risk-free rates. The rising probability of an October hold has created a near-term data vacuum for risk assets. More broadly, September's ETF flows suggest that when growth has not stalled, hikes are largely priced in, and spot channels remain open, institutions treat Bitcoin as an allocable asset rather than merely an easing hedge. Spot products linked to Ethereum and Solana also saw net inflows during the same week, pointing to broader, portfolio-driven demand rather than a one-off short-covering episode. Key signposts now include three variables: whether PCE/CPI stay above 3%, effectively locking in a December hike; whether financial conditions truly tighten as Treasury yields rise; and whether spot ETFs can sustain net inflows as Bitcoin approaches holders' cost basis. If rates climb while flows turn negative, the "risk can absorb hikes" narrative weakens. If inflation eases at the margin, an October pause is confirmed, and monthly ETF flows remain positive, crypto is more likely to trade on allocation demand amid lower volatility rather than on expectations of a new round of major easing.