Banks moved onto crypto rails, and Bitcoin stayed put

The story

Banks move onto crypto rails

Payments giant Fiserv switched on its digital asset platform this week. Its first product is Roughrider Coin, a dollar stablecoin from the Bank of North Dakota that runs on Solana, and more than 90 banks and credit unions are expected to use it. A day earlier, Stripe, Visa, Mastercard, Coinbase and Shopify launched Open USD, backed by more than 200 partners. HSBC also named its planned Hong Kong dollar stablecoin, RedCoin. Crypto's networks are starting to carry everyday bank money, whatever Bitcoin's price does.

The bigger picture

Still tight, Fed hesitates

Bonds hit a 24-year high. The 10-year US Treasury yield, what the government pays to borrow for a decade, touched about 5.3% this week, its highest in roughly 24 years. Safe bonds paying over 5% give big investors less reason to take a chance on crypto.

Fed leaders lean toward patience. Fed leaders John Williams and Philip Jefferson both signaled they may want more time before raising rates again, and the odds of an October rise fell below 40%. Fewer rate rises would help crypto, but rate cuts are still nowhere in sight.

Bitcoin and Ethereum

Bitcoin ended the week almost where it began, near $85,000, even as US bond yields hit a 24-year high. Money going into US Bitcoin funds dwindled through the week and turned to a small outflow on Wednesday, the first since September 16th.

What people are talking about

Bitget hack rattles exchanges. Bitget lost about $387 million to hackers it suspects are North Korean. Bitcoin and Ethereum themselves were untouched.

Robinhood goes big. Robinhood showed off AI trading helpers and a social feed, and said what it offers for US crypto futures depends on regulators.

Prediction markets lose in court. A US appeals court sided with Ohio and Tennessee against Kalshi, and the fight is now heading toward the Supreme Court.

Expert voices

What could change

0:00 · Intro

Hey, welcome back. This week Fiserv, Stripe, Visa, Mastercard and Coinbase all launched dollar stablecoins that real banks and businesses can use. In the same week, the US government's borrowing costs hit their highest level in 24 years, and money going into Bitcoin funds slowed to a trickle. Bitcoin itself went nowhere. So why did good news from banks do nothing for the price?

0:25 · Where the market stands

Well, let's look at the state of play. Bitcoin first. Bitcoin is around 85,000. That's almost exactly where it was last Friday, so it's been a flat week. It touched close to 87,000 last Wednesday and has sat a few percent below that since.

The Fear and Greed index, the gauge that tracks the market's mood, reads 72. That's "greed." A week ago it read 71. One point of movement in 7 days. Nobody panicked and nobody got more excited.

0:53 · Banks move onto crypto rails

And so on to the big story this week. It's all around stablecoins.

What is a stablecoin? A stablecoin, if you're not familiar, is a digital token that's designed to always be worth exactly 1 US dollar. It moves on a blockchain, at any hour, instead of through the slower channels banks normally use.

Now we see Fiserv, it's a big payments company, and October 1st it switched on its digital assets platform. The first product is Roughrider Coin, a dollar stablecoin from the Bank of North Dakota. It runs on Solana, and more than 90 banks and credit unions in North Dakota are expected to use it. Then we've got Open USD.

On September 30th, Stripe, Visa, Mastercard, Coinbase and Shopify launched it through a group called Open Standard with more than 200 partners behind it. It's live on Ethereum, Base, Solana, and Stripe's own chain, Tempo. And partners earn rewards based on how much of it they use.

And then we've got HSBC. It named its planned Hong Kong dollar stablecoin RedCoin. Planned, not launched. It's meant to arrive in the second half of this year, starting in 2 HSBC apps.

Put all those together and you have 90 plus banks in a single state, 200 plus companies behind another coin, and a global bank planning its own, all picking crypto networks to move dollars on. Crypto's networks are starting to carry everyday bank money, whatever Bitcoin's price is doing.

2:25 · Still tight, Fed hesitates

So let's zoom out and look at the big picture.

The US government borrows money by selling bonds, right. The interest it pays on those is called the yield. This week the 10-year yields touched about 5.3%, the highest in about 24 years.

When the safest investment there is pays you more than 5%, big investors don't have to take a chance on anything. They can sit and collect. Crypto has to beat that to get their attention.

And so the Fed isn't sure what to do next. John Williams, who runs the New York Fed, and then Philip Jefferson, the Fed's vice chair, both signaled this week that they may want more time before raising rates again. The odds of a rate rise at the October meeting dropped under 40%.

So you might be wondering: if bonds pay this much, why didn't Bitcoin fall? It swung. One day it went from above $85,500 to below $83,500 in about an hour and a half, and then it came back. I don't know the whole reason it held, and I'd be wary of anyone who says they do.

3:28 · Bitcoin and Ethereum

So let's look at the majors.

And Bitcoin first. The news was good and the price did nothing. It finished almost exactly where it started, around $85,000.

Part of the reason is the funds. On Monday of last week, more money went into the US Bitcoin funds than on any day in almost a year. But it started this week it slowed to a trickle, and on Wednesday it turned into a small outflow. That's the first day of money leaving those funds since September 16.

The Ether funds also saw money leave 2 days in a row this week. And last week the SEC's staff said that the receipts people get for staking their Ether aren't securities. That's a staff view, not a rule.

4:08 · What people are talking about

And so to the latest news: another hack.

Bitcoin wasn't hacked. Or Ethereum wasn't hacked. An exchange was. On September 24th, Bitget lost about $387 million. Bitget says it suspects a North Korean hacking group, and that's a suspicion, not a confirmed finding. The company says user funds are protected, and it points to its own protection fund, which holds more than $464 million. The hacker tried to move more than $50 million through a service on the NEAR network, and it turned almost all of it back. About $166,000 got through. The rule for you: an exchange hack is a problem for coins sitting on exchange. You don't leave them on exchange, it's no problem.

Robinhood held a big event this week. It showed AI helpers that can trade inside the app, and the social feed. On bringing crypto futures to US customers, which is a way to bet on a price with borrowed money, a Robinhood executive said what it offers first "depends on regulatory structure on what's permissible." So that's waiting on regulators.

And prediction markets lost in court. This week a US appeals court sided with Ohio and Tennessee against Kalshi over sports contracts, and the fight is heading towards the Supreme Court.

5:29 · Expert voices

Now over to some expert voices.

And we have Matt Hougan, chief investment officer at Bitwise, wrote on Wednesday: "Crypto sacrificed long-term certainty and got better rules, faster." What's he mean? The crypto market bill failed in the Senate two weeks ago. His point is that crypto came out ahead anyway, because regulators have acted faster than a law would have.

Then we have Dan Katz, first deputy managing director of the IMF, the International Monetary Fund, said at Sibos, the big annual banking conference, on Monday: "Tokenization may be especially promising, since tokenized assets are natively programmable and can settle almost instantly, at any hour." Tokenization means putting an asset on a blockchain. Note the "may be" in his sentence.

Then we have Lorie Logan, president of the Federal Reserve Bank of Dallas, said on Thursday: "I currently estimate the target range needs to rise an additional 50 basis points or more to appropriately balance the outlook and risks for our dual mandate goals." That's a half a percentage point or more of extra rate rises. It's the opposite lean to Williams and Jefferson's note that we heard from earlier, but note "currently estimate."

And then we've got Christine Lagarde, president of the European Central Bank, told the European Parliament on Monday: "A sharp reassessment of AI companies' prospects and the sustainability of their debt could trigger market corrections and spill over to euro area investors and the wider economy." Note the "could." She's saying that if investors turn on AI companies, the damage could spread well beyond them.

7:08 · What to watch next

And so that's what's coming up this week. And here's a few things. On Wednesday, October 7th, the Fed publishes the minutes of its September meeting. Fed speakers will also react to Friday's jobs report. Watch whether money starts coming back into Bitcoin funds. And watch Bitget: the final loss figure, and whether the North Korean suspicion gets confirmed. And the Fed's next rate decision is on October 28th.

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8:07 · The bottom line

And so yes, US bonds hit a 24-year high this week, the Fed can't agree on whether to raise rates again, and the money going into Bitcoin funds slowed to a trickle and then turned into an outflow. That's a harder world for anything risky.

But in the same week Fiserv switched on a stablecoin platform for banks, Stripe, Visa, Mastercard and Coinbase launched Open USD. HSBC named its planned stablecoin, and Bitcoin held near 85,000 through all of it. That's your week in crypto. See you next Friday.

The Crossover Weekly is for information and education. It isn't financial advice. Read our disclaimer.