Q4 2026 Outlook Breakdown - Part 1: The Policy Backdrop

In our Q3 Outlook we gave the bear market a defined off switch: a weekly close above $83,000. Bitcoin closed the week beginning 21 September above that level and has since traded as high as $87,400.

Judged by the standard we published, we regard the bear market as over.

The cycle low was $57,800. Bitcoin sits nearly 50% above it and roughly 33% below its all-time high of $126,272. The broader bull market is not yet underway.

A finished bear market does not make the near-term macro backdrop any friendlier. That backdrop is the test our thesis still has to survive.

The Fed Is Tightening Into a Supply Shock

On 16 September the FOMC raised rates by 25 basis points to 3.75% to 4.00%, the first hike since July 2023, in a unanimous 12-0 vote.

The projections matter more than the decision. Sixteen of 18 participants expect another hike this year, the median points to a year-end rate of 4.1%, and core inflation is forecast to climb to 3.4% before it eases. Two meetings remain, 27 to 28 October and 8 to 9 December.

The pressure comes from the supply side. Crude peaked at $106 last quarter as the Middle East conflict escalated, and the spike had reached producer prices by the September meeting. Raising rates into a supply shock is a demanding setting for risk assets, and traders have begun to use the word stagflation. Warsh has offered no forward guidance, so volatility can arrive with any data release.

Energy is the part that has already improved. Crude sits around $90. If it holds, the supply pressure behind the Fed’s next decision eases, and December becomes a more open question than September’s projections suggest.

Japan Is Managing the Unwind

Japan’s 10-year yield touched 3% in early September, its highest since 1996, and the 30-year sits above 4%. On 18 September the Bank of Japan raised its policy rate to 1.25%, the highest since 1995, in a split 7-2 vote.

The risk to Bitcoin runs through the carry trade. Cheap yen has funded leveraged positions worldwide for two decades, and crypto sold off the day the 10-year crossed 3%. The September decision points to an orderly adjustment. The split vote casts doubt on the pace of further hikes, and the Fed raised by the same amount, so the rate gap of roughly 2.75 percentage points that sustains the trade is unchanged. The risk looks lower for Q4 than it did a month ago.

Washington Is Running the Same Playbook

Japan is the largest foreign holder of US Treasuries, so strain in its bond market feeds into US yields. The 10-year sits near 4.79% to 4.80% and the 30-year near 5.25%.

The Treasury has stepped into its own market. Buybacks in the 10 to 30-year sector doubled on 19 August and tripled to $6B on 9 September. The next day it bought $5.19B, short of its own cap, and the 10-year rose to 4.95%, its highest since 2023.

Both authorities are buying their own debt to cap yields while the fiscal pressures underneath remain unresolved. The next checkpoint is 4 November, the day after the midterms, when buyback sizes are set.

What This Means for Bitcoin

Most of this is a headwind, and the biggest one Bitcoin and other risk-on assets all have. Higher rates raise the opportunity cost of holding an asset that pays no yield, and rising yields draw capital towards government debt. We expect Bitcoin to trade that way through the quarter.

The more useful question is which forces it responds to. Historically it has traded poorly against rising real rates and well against falling confidence in monetary management. Both are present now and pull in opposite directions.

Our thesis can still survive and thrive with this backdrop. What it needs is for confidence in monetary management to matter more than real rates over a longer horizon.

What We Are Watching

These are items we are tracking, and they carry no trading instruction.

• 27 to 28 October FOMC. The next read on the rate path.

• Crude holding near current levels.

• 4 November Treasury buyback decision.

• A weekly close above $83,000. A close back below it, over two or more consecutive weeks would put the breakout in question.

• The short-term holder cost basis, around $71,200. A sustained loss would mean recent buyers are underwater in aggregate, and it would invalidate the thesis.

We track the levels above through the quarter in these notes. The deeper analysis behind them is in our Q4 2026 Outlook, The Recovery Nobody Believes.

Read the full report here

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Stormrake Spotlight: Pax Gold (PAXG) ($4,141)

Source: https://www.tradingview.com/x/loEsE1oM/

PAXG still rests at the September 28th lows from last week, with price action being rather muted over the weekend. Bears look to test the upper-end of the key support zone once again, targeting close to $4,000 if this current leg produces more downside over the days and weeks ahead. For bulls to take back momentum with conviction in the short-term, we’d be looking for a convincing and sustained move back above $4,400.

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BTC/USD Key Levels and Price Action:

Source: https://www.tradingview.com/x/CP9o8luY/

Bitcoin on the other hand is looking rather textbook here. The breakout of the Inverse Head and Shoulders neckline came, clearing well past $83,000 - then came back to retest that same level, now acting as support. It’s retested multiple times over the last few days too and each time holding firmly above the key level. Now this morning, Bitcoin is up over +1.50% and climbing quickly as the move looks for further continuation higher. Momentum is strong in Bitcoin now the bottoming breakout has occurred, which is historically typical in the early stages of a bull run. If momentum does slow down however, as long as we accumulate within a healthy channel above the breakout; that’s also a very bullish sign, not to be mistaken for bearishness if it comes. That coiling momentum as we grind higher is exactly what the bulls need to eventually blast through the All Time High price of $126K once again.

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*All prices are denominated in USD unless stated otherwise*

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Written by James Ryan