Bitcoin and gold surged sharply after the U.S. Treasury announced plans to double its long-term debt buybacks. The move triggered a sharp dollar sell-off and pushed bitcoin above $77,000. Meanwhile, President Donald Trump urged Congress to pass crypto legislation during a White House conference.
Alternative assets experienced a dramatic reversal as frantic bond market action and fresh Washington policy pushes converged. Both bitcoin and gold captured strong upside momentum, recovering from earlier slumps amid frantic action surrounding the bond market and legislative developments. Bitcoin had dropped from a January high around $95,000 to below $60,000 at the end of June as investors shied away from speculative assets and crypto supporters worried about a lack of movement on proposed industry regulation. On Friday, bitcoin rose above $77,000. Gold hit a high above $5,300 in January but dropped to around $4,000 in June as rising rates made interest-bearing investments more attractive. Gold rose to $4,661 on Friday. Treasury Intervention and Bond Market Strain
Treasury Intervention and Bond Market Strain
The first jolt arrived when the U.S. Treasury Department revealed plans to significantly increase its buybacks of long-term Treasurys, or government debt. In a surprise announcement Wednesday, the U.S. Treasury Department said that it would at least double the size of its planned purchases of longer-term government debt. The maneuver was intended to calm bond markets after a sustained sell-off, meaning investors were asking for higher yields to lend money to the U.S., which suddenly seemed more risky. Treasury Secretary Scott Bessent is attempting to lower long-term borrowing costs, a move that can put upward pressure on inflation at a time when inflation is already elevated. Bessent’s maneuver could handcuff the Federal Reserve, which fights inflation by raising interest rates. National Debt Milestones and the Debasement Trade
National Debt Milestones and the Debasement Trade
Complicating the economic backdrop, the U.S. national debt surpassed a record $40 trillion on the same day that the Treasury’s actions unfolded. The milestone figure was recorded just five months after the U.S. hit a record $39 trillion debt in March. It reached $38 trillion five months before that, in October. There is already a lot of anxiety over inflation, particularly because of the conflict in Iran and soaring energy prices. If yields on U.S. bonds are not truly reflecting risk, you can often see that play out in the value of the U.S. currency, which took a significant downward swoop Wednesday. Capital fleeing the dollar and Treasurys flowed directly into what is known as the debasement trade,
when investors flood into alternative assets such as gold, which rose more than 2% Wednesday. The debasement trade now includes bitcoin. Bitcoin jumped more than 20% this week. White House Crypto Push and Regulatory Momentum
White House Crypto Push and Regulatory Momentum
Cryptocurrency had a very good week in Washington. On Wednesday President Donald Trump, who banked nearly $1.2 billion from his crypto businesses last year, held a crypto conference at the White House where he called on Congress to pass the crypto-friendly Clarity Act, saying that it would keep us ahead of China, keep us ahead of everyone else.
Trump then yielded the floor to Commodity Futures Trading Commission Chair Mike Selig, who vowed to use every tool available
to advance Trump’s agenda. Selig’s comments came ahead of a CFTC meeting Thursday examining ways the agency can use its existing authority to ease crypto rules. A day earlier, other regulators proposed rules making it easier for crypto companies and projects to raise money from the public. Since taking office, Trump has pushed policies friendly to the crypto industry and reversed a Biden administration regulatory crackdown. Bitcoin Squeeze and Commodity Price Recovery
Bitcoin Squeeze and Commodity Price Recovery
Before the policy announcements, bitcoin can sometimes get a bump when the U.S. dollar is on the ropes as investors try to unload the U.S. currency. But you don’t typically see the kind of related movement that was observed with bitcoin this week. The price of bitcoin had been stuck between $62,000 and $67,000 for weeks. Investors seized on that weakness, many placing bets that the cryptocurrency would be stuck in that range for some time to come. However, on the day that the Treasury announced its buybacks, Treasury yields fell, as did the dollar, and bitcoin blasted through that upper level of $67,000. The Treasury’s actions negatively affected the money investors could make on U.S. bonds and the dollar, and boosted the value of bitcoin, allowing it to climb above $77,000 by Friday.