Business 5 min read By Bethany Hadley
Treasury bond move fuels bitcoin surge past $77,000
Bitcoin jumped above $77,000 after the US Treasury announced larger long-term debt buybacks, triggering a short squeeze that liquidated over $4 billion in bearish crypto positions.
Bitcoin and gold rallied sharply this week after the US Treasury announced a surprise expansion of its long-term debt buyback programme, a move that weakened the dollar and forced traders who had bet against the cryptocurrency to unwind their positions. Bitcoin rose above $77,000 on Friday, a jump of more than 20% over the week, while gold climbed to $4,661, recovering from a June low near $4,000.
The catalyst came Wednesday when the Treasury Department said it would at least double the size of its planned purchases of longer-term government debt. The intervention was designed to calm bond markets after a sustained sell-off, but it also raised questions about whether the government is trying to push borrowing costs lower despite inflationary pressures. Treasury Secretary Scott Bessent is attempting to reduce long-term borrowing costs, a move that could add upward pressure to inflation at a time when prices are already elevated, and may complicate the Federal Reserve's efforts to fight inflation with higher interest rates.
The Treasury's action triggered an immediate reaction in financial markets. The dollar sold off, and investors moved toward alternative assets, including gold and bitcoin. The so-called debasement trade, where investors seek assets that hold value when fiat currencies weaken, gained momentum. Gold rose more than 2% on Wednesday alone, and bitcoin broke through the upper end of a range it had been stuck in for weeks.
Bitcoin had been trading between $62,000 and $67,000 for several weeks, and many traders had placed bets that it would remain in that range. When the Treasury announcement pushed yields and the dollar lower, bitcoin blasted through the $67,000 level. That forced investors who had shorted bitcoin, or bet that its price would stay subdued, to close their positions by buying back the digital asset, adding further upward pressure. By Friday, more than $4 billion in bearish crypto positions had been liquidated during the rally, according to CoinGlass, which tracks cryptocurrency derivatives markets.
The move came against a backdrop of record US government debt, which surpassed $40 trillion on the same day as the Treasury's announcement. The milestone was reached just five months after the US hit $39 trillion in March, and five months after that, the debt stood at $38 trillion in October. Anxiety over inflation is already high, particularly due to the conflict in Iran and soaring energy prices, and the Treasury's intervention raised concerns that bond yields are not truly reflecting risk.
Bitcoin also benefited from political developments in Washington. On Wednesday, President Donald Trump, who earned nearly $1.2 billion from his crypto businesses last year, held a cryptocurrency conference at the White House and called on Congress to pass the crypto-friendly Clarity Act, saying it would keep the US ahead of China and other rivals. Commodity Futures Trading Commission Chair Mike Selig vowed to use every tool available to advance the president's agenda, and a day earlier, other regulators proposed rules making it easier for crypto companies 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.
The combination of Treasury intervention, dollar weakness, record debt, and political support for crypto created a powerful tailwind for bitcoin. The short squeeze amplified the rally, as forced purchases added fuel to the price increase, potentially triggering still more liquidations as prices climbed. The episode highlights how interconnected bond markets, currency movements, and digital assets have become, and how a single policy announcement can reshape trading dynamics across multiple asset classes.
