Fed Holds Rates With Two Dissents for a Hike, and Bitcoin ETFs Lose About $200 Million in a Week

No hike in October, but two votes for one

On October 28 the Federal Reserve voted 10 to 2 to keep the federal funds target range at 3.75% to 4%. That level comes from the 0.25 point hike on September 16, which passed 12 to 0. The two dissenters, Lisa D. Cook and Beth M. Hammack, both preferred to raise the range by another 0.25 points.

The statement says economic activity is expanding at a strong pace and inflation remains elevated. At the press conference Chair Warsh was asked why the Fed did not simply hike. He gave no timetable: the committee wants to gather more information, he does not give advance guidance on the rate path, and he will not prejudge the next meeting. On whether December brings a hike, the Fed has taken no position.

Inflation stepped up again, while job growth stayed weak

The Bureau of Labor Statistics reported on October 14 that September CPI rose 0.6% on the month, and the annual rate went from 3.4% in August to 3.7%. Core CPI, which excludes food and energy, rose 0.3% on the month and 2.6% on the year, versus 2.4% in August. Gasoline rose 9.1% in the month and accounted for more than half of the overall increase; the energy index was up 20.4% from a year earlier.

On jobs, the September report published on October 2 showed nonfarm payrolls up only 29,000, after an average gain of 45,000 a month over the prior 12 months. The unemployment rate was 4.2% and has stayed between 4.1% and 4.3% since March. July was revised down from +21,000 to -10,000, and August from +162,000 to +133,000. At the press conference Warsh described conditions on the employment side as quite positive. With few new jobs and a flat unemployment rate, one report alone makes it hard to call the labor market strong or weak.

ETF inflows for four days, then one day turned negative

According to Farside and SoSoValue, US spot bitcoin ETFs had about $203 million in net outflows from October 26 to 30; the two sources differ by less than $1 million. Monday through Thursday each saw net inflows, about $440 million in total. On October 30 alone net outflows were about $643 million, the largest single-day outflow since June 25.

By fund, BlackRock's IBIT still took in about $177 million for the week, while Fidelity's FBTC lost about $166 million and Ark and 21Shares' ARKB lost about $130 million. SoSoValue puts total net assets of the spot bitcoin ETFs at about $98.14 billion, so by our estimate the one-day outflow was about 0.7% of that. That ratio is BlockBlah's own calculation, and the asset figure is dated after the outflow.

On price, CNBC reported that bitcoin fell more than 4% on Friday, October 30, to about $77,995. CoinGecko quoted $77,079 at 4:26 a.m. Taipei time on November 3.

The data cannot separate the cause of the outflow

The same week also brought the Binance security incident. On October 29 Binance announced an estimated impact of about $6.3 billion, with about $3 billion frozen on-chain, said it would cover losses from its SAFU fund and company funds, and paused withdrawals for a time. The large outflow on October 30 came the day after that announcement.

Overlap in timing is not causation. Jeff Ko of ViaBTC told The Block that ETF holders have no direct exposure to Binance and that this looks more like a sentiment shock; Rick Maeda of Laevitas called it a day of de-risking, not a loss of institutional confidence. ETFs still took in about $137 million on the day of the Fed decision (October 28) and about $17 million the day after, which shows no clear reaction to the decision. BlockBlah judges the Binance incident the likelier suspect, but one day of data cannot carry a conclusion, and rate expectations and other factors cannot be ruled out.

Four things are still unknown: the ETF flows for November 2 (Farside had not updated when this was written), the results of the October jobs report and CPI, how the market is pricing a December hike, and the full findings of the Binance investigation.

Four dates to watch

The October jobs report comes out on November 6 at 8:30 a.m. US Eastern time, which is 9:30 p.m. in Taipei. October CPI follows at the same time on November 10, and both land after the Taiwan stock market has closed. Under the rule on the Fed's calendar page, minutes of the October meeting are released three weeks after the decision, which works out to about November 18. The next FOMC meeting is on December 8 to 9 and comes with updated projections.

BlockBlah's view is that the two reports answer one question: whether September's inflation jump was a one-off shock driven by gasoline, or is spreading. Core CPI is up 2.6% against 3.7% for the headline figure, and the gap mostly comes from energy. If core also climbs in October, talk of a December hike carries more weight and risk assets may reprice; if core settles, Warsh's wait for more information could turn into a longer pause. This is a conditional scenario, not a forecast. BlockBlah did not verify how the market is pricing a December hike, so it makes no comment on that.

This article is a summary of data, not investment advice. Bitcoin prices swing widely and ETF flows can reverse day to day, so a one-week figure goes stale quickly.