BlockByte Weekly: The Paradox Behind This Week's Rally

Thanks for reading The BlockByte Weekly, where we summarise the key updates in crypto over the last week and provide our perspective on what you need to know as an investor.

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Weekly Snapshot

• BTC: US $115,852 (+5.2%)
• Crypto Market Cap: US $4.02T (+7.0%)
• Gold: US $3,643/oz (+2.7%)
• S&P 500: 6,584 (+0.9%)
• ASX 200: 8,864 (+0.4%)
• 10-Year Treasury Yield: 4.07% (-0.03%)

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Key Stories This Week

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Executive Summary

This week, the crypto market rallied by 7%, while the large caps like Bitcoin (+5.2%) and Ethereum (+9.0%) had solid returns, there was more bullish sentiment in the altcoin market. Solana rose by (+21.8%) and Hyperliquid is up by (+19.8%).

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Driving the rally, is something of a paradox: economic data in the US shows a spike in weekly jobless claims and downward revisions in payroll data. Markets have rallied on this news due to the increasing likelihood of rate cuts next week by the Fed.

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Adding to the rally, institutional demand and corporate treasury adoption remain strong. Japanese firm Metaplanet announced a further US $1.4B capital raise for additional Bitcoin purchases. Meanwhile, Ethereum treasury company BitMine grew its total Ether under management to ~US $9.7B. Forward Industries raised US $1.65B for a Solana treasury, fueling recent price growth in addition to upcoming SOL ETF announcements.

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Despite the signs of some cracks in the US economy, the sheer scale of institutional buying of digital assets is underpinning a continued bullish outlook for the digital asset market amid increasing probabilities of easing monetary policy.

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Weakening US Labour Market Increases Rate Cut Odds

This week we saw a series of key economic data points released by the US which saw markets rally. August CPI figures ticked up 0.2% to 2.9%. However, it was the rising jobless claims which surged to 263,000 for the week — the highest in nearly four years that raised investors expectations of a rate cut next week.

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Adding to the jobless claims, the Bureau of Labour Statistics revised its job growth figures down by 911,000 for the quarter ending March 2025 — the largest downward revision in 110 years of collecting payroll data. The adjustment signals a weaker labour market than previously thought.

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While economic growth appears to be slowing, we think calls of a stagflationary environment (low economic growth, high unemployment and high inflation) are premature. For now, unemployment is at 4.3% which is in line with historical norms, but has been rising steadily in recent post-COVID years.

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Prediction markets on Polymarket now assign a 98% chance of a 0.25% or higher rate cut next week. The decision is expected to be announced on Wednesday in the US or 4am on Thursday (AEST).

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The Paradox of a Slowing Economy & Rising Markets

Looking at the chart below, on the black line is the interest rate, also called the federal funds rate set by the US central bank. An interesting observation is that when rate hiking cycles begin (red vertical lines), Bitcoin's price (yellow line) can often decline. When rates are paused or move down (green vertical line), bitcoin's price tends to increase until the next rate hiking cycle begins.

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While not perfect, this pattern is something worth considering as we approach the next round of rate cuts.

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To understand why markets and digital asset prices tend to rally during rate cut environments, it's worth noting that ~US $7.48 trillion of cash is currently parked in 5% yielding money market funds. When the Fed cuts rates, the yield in money market funds also drops, which means that some of that cash starts to look for better risk-reward opportunity elsewhere - often flowing into equities - and perhaps increasingly, digital assets.

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Japan’s Metaplanet Raises US $1.4B for Bitcoin Treasury Expansion

Earlier this week, Tokyo-listed Metaplanet announced it will raise US $1.4 billion via an international equity offering to fuel its bitcoin treasury strategy. The firm is currently the sixth-largest among public companies holding Bitcoin.

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The Japanese Yen continues to weaken and we think this is a large driver of Metaplanet's strong performance as local Japanese investors look for hedges against the devaluation of their currency.

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BitMine Surges to US $9.7B ETH Treasury Position

‍BitMine Immersion Technologies now holds US $9.7 billion in Ethereum, making it the largest Ether treasury firm globally.

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​BitMine is positioning ETH as a sovereign-grade reserve asset. We expect this to accelerate and Ethereum's price is well positioned to continue to benefit near-term. For other Ethereum treasury companies like SharpLink that are a distant second, they will need to compete on lower mNAV which is effectively being priced at a lower multiple of net asset value for the Ethereum held.

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What's Driving Solana's Rally?

Solana (SOL) has surged to US $247, up 70% in the last 3 months. Driving the rally is the expectation of ETF approvals in mid-October. In addition, the protocol recently demonstrated over 100,000 transactions per second in stress testing, reinforcing its technical edge over other blockchains.

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To add to the upward price momentum, Nasdaq-listed Forward Industries announced a US $1.65 billion raise led by Galaxy Digital, Jump Crypto, and Multicoin Capital to build a Solana-denominated treasury. This positions Forward as the largest public SOL treasury holder and deepens Solana’s positioning as a reserve-grade digital asset.

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Solana’s growing corporate treasury adoption and network strength make SOL one of the most structurally sound altcoin plays in the current market.

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Until next week,

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James Brannan
Managing Director
BlockByte