The Beaver Bulletin is back. A lot happened while we were away, and the highlights are below. One story sits under most of it, though, and it isn’t about bitcoin. It’s about what the U.S. government pays to borrow money.
As of Friday, that was 5.63% on a 30-year loan, near the highest rate since 2002. It matters to everyone because other borrowing costs tend to follow it, including mortgage rates here in Canada.
The rate is rising because lenders are nervous. The Iran war pushed up oil prices and inflation, and the U.S. now owes more than $40 trillion. People lending to Washington want a higher rate to make up for the added risk.
The standoff
Two parts of the U.S. government are pulling in opposite directions.
The Treasury, which does the borrowing, would like rates lower. In August it said it would buy back more of its own long-term bonds. Rates dipped, and three weeks later they were higher than before.
The Federal Reserve, the central bank, is more worried about inflation. In September it raised interest rates for the first time in more than three years.
On Friday, a weak jobs report made another increase this month unlikely. Long-term rates rose anyway. The Fed sets short-term rates, but lenders set the long-term ones.
The only way to overrule those lenders is for the Fed to create new dollars and buy the government’s bonds itself. The question is whether it ever will. Who blinks?
What blinking looks like
If the Fed gives in, the likely tool is a cap. It picks a maximum interest rate and buys government bonds with newly created money until rates stay under it. Economists call this yield curve control. It works a lot like rent control: the price holds, but the pressure shows up somewhere else.
Three examples stand out.
- United States, 1942 to 1951. Rates were capped at 2.5% to pay for the war. Inflation later hit 20%. Savers paid the bill.
- Japan, 2016 to 2024. Rates were held near zero. The yen fell to its weakest level since 1990. The currency paid the bill.
- Australia, 2020 to 2021. Investors pushed rates past the cap, and the central bank gave up. Its reputation paid the bill.
What it could mean for bitcoin
Bitcoin pays no interest. When safe government bonds pay more than 5%, bitcoin has real competition. When they pay less than inflation, it has much less.
That leaves three paths.
1. The Fed doesn’t blink. Rates stay high. That has hurt bitcoin before: it fell more than 75% from its 2021 peak as rates rose in 2022. This summer was different. Bitcoin gained more than 40% in three months while rates climbed.
2. Nobody blinks, and nothing breaks. Rates stay high but steady, and bitcoin moves on its own news.
3. Something breaks, and the Fed caps rates. The first days could be rough. In a scramble for cash, bitcoin gets sold along with everything else, as it was in March 2020, when it lost half its value in two days. What comes next is the reason many people own it. Once the Fed starts creating money, history says savers and the currency take the hit. Bitcoin ended 2020 at record highs.
Nobody knows which path we’re on, and that includes us. Bitcoin has never lived through a U.S. rate cap.
Closer to home: Canada’s 5-year bond rate, which drives fixed mortgage rates, hit a 52-week high on September 28, and the big banks raised their fixed rates. The Fed and the Bank of Canada both announce rate decisions on October 28.
Enjoy another Sunday edition ☕
*Dollar figures in USD unless CA$ indicated.
While we were away
📊 Market
- Bitcoin made a round trip. It fell to about $58,000 in late June, its lowest level since October 2024, then gained more than 40% in the third quarter. Crypto Briefing
- ETF buyers came back. U.S. spot bitcoin ETFs took in about $2.4 billion from September 21 to 25, which Glassnode calls the largest weekly inflow in almost a year. Farside
🏛️ Institutions
- Strategy sold bitcoin, then went back to buying. The largest corporate holder sold coins in May for the first time since 2022. It now holds 847,666 BTC. CoinDesk
- SpaceX owns 18,712 bitcoin. The figure came out in its IPO filing in May. CoinDesk
- The big U.S. crypto bill stalled. The CLARITY Act failed a key Senate vote, 49 to 50, on September 15. CoinDesk
📡 Signal
- The Pentagon runs a Bitcoin node. A top U.S. admiral told the Senate in April that his command operates one. Bitcoin Magazine
- Custody failed both ways. Thefts tied to the Coldcard wallet bug we covered in August reached $115 million, and the exchange Bitget lost about $387.5 million to hackers in September. Bitcoin Magazine, Bitget
🇨🇦 Canada
- Ottawa wants to ban crypto ATMs. The federal government proposed a nationwide ban in May, citing fraud. Department of Finance
With Beaver you have four ways to buy bitcoin, whether you’re buying for the first time or funding a corporate treasury.
- Instant Buy: from $150 to $25,000+ via Interac®️ e-Transfer
- Large Buy: up to $100,000 via bill pay or bank transfer
- Recurring Buy: fully automated from your bank account
- OTC: for more than $100,000 there’s Beaver Plaid
You don’t have to guess who blinks, and you should be wary of anyone who says they know. Three dates will tell you more than any forecast: October 28, when the Fed and the Bank of Canada decide on rates; November 3, the U.S. midterm elections; and November 4, when the Treasury lays out its next round of borrowing. If rates get capped, history says savers pay. If they don’t, borrowing stays expensive. Either way, it helps to know which kind of money you’re holding.
Aubrey
The Beaver Bulletin is a weekly newsletter on global Bitcoin adoption. To get the bulletin directly in your email inbox, subscribe here.