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Bitcoin surged above $78,000 on Friday as investors digested a major shift in the US Treasury’s bond-buyback strategy. The rally comes after the Treasury decided to double the size of planned purchases of longer-dated government bonds.
The Treasury will increase buybacks of 10- to 30-year debt to at least $4 billion per operation, up from $2 billion. The program is scheduled to begin on September 9. The move does not amount to Quantitative Easing (QE). The Treasury is managing the maturity profile of government debt by buying older, longer-term securities.
Market reaction was notable. Long-term US Treasury yields fell, while the US dollar weakened. Both trends typically support risk assets, including cryptocurrencies.
The move happened after the 30-year Treasury yield hit its highest level since 2007. It was explained that the buybacks will improve liquidity in the long-term bond market. However, for investors, there is something else in the decision by the authorities that goes beyond the amount of purchases.
The Treasury intervention has not solved the underlying bond-market problem. Long-term yields rose again after their initial decline, reflecting persistent concerns over inflation, fiscal deficits and heavy government borrowing.
That makes Bitcoin’s rally vulnerable if yields continue climbing. For now, however, investors are trading the signal rather than simply the policy mechanics.
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