Bitcoin (BTC) topped $80,000 for the first time in about three months after reports that the U.S. Treasury Department is pursuing both wider use of dollar-pegged stablecoins and lower long-term Treasury yields. Expectations for passage of the CLARITY Act and a return of institutional money to spot bitcoin exchange-traded funds (ETFs) added to the momentum.
Bitcoin crossed $80,000 on the 25th and traded between roughly $80,500 and $81,000, according to CoinMarketCap. It was the first time the cryptocurrency had traded above $80,000 since May 15 this year. After falling to the $58,000 range in late June and early July, bitcoin has rebounded about 38% from that low and gained about 28% so far this month.
The Treasury Department was the main driver of the rally. The department earlier said it would double the size of its long-term Treasury buybacks. Treasury Secretary Scott Bessent's broader plan then became public. The Wall Street Journal reported on the 24th that the Treasury's long-term debt buybacks and its easing of cryptocurrency rules are working in tandem toward the same economic goal.
The U.S. government plans to increase issuance of short-term Treasury bills and use the proceeds to buy long-term Treasurys, seeking to steady the market and bring down 30-year yields now running at 5.2% to 5.3%. Bessent described the approach to CNBC as a "Treasury Twist." The term plays on "Operation Twist," the name for the Federal Reserve's practice of selling short-term debt and buying long-term debt, with the government rather than the central bank carrying it out.
The question is demand for short-term bills, and rising issuance of dollar stablecoins could sharply increase that demand because the coins are backed by such assets as reserves. The Journal noted that Bessent has said the stablecoin market could grow to $4 trillion, and reported that he sees this as capable of supporting short-term demand.
Market participants say the measures are creating a favorable environment for bitcoin and cryptocurrencies more broadly. The dollar also weakened after the expanded buyback announcement.
Institutional buying is pushing bitcoin higher as well. Spot bitcoin ETFs listed in the United States drew about $1.9 billion in net inflows last week, according to the cryptocurrency news outlet CoinDesk. That was the largest weekly net inflow since October last year.
Some analysts expect the rally to continue for a while. Others point out that prices rose even though Strategy, the company holding more bitcoin than any other in the world, did not add to its holdings. Fundstrat said on the same day that bitcoin rose last week as buying continued even after a short squeeze — the repurchase of assets that had been borrowed and sold — and that the move has a chance of lasting rather than ending as a brief rebound.
Still, some caution that it remains to be seen whether the policy direction translates into actual regulatory change. Some in the industry compare the current situation to March last year, when the United States announced a strategic bitcoin reserve. Prices rose then as the announcement was taken as positive news, but fell once the details fell short of market expectations. Yoon Seung-sik, a director at Tiger Research, said a pro-cryptocurrency stance is likely to continue with U.S. midterm elections coming in November, and that bitcoin's upward trend could persist barring major macroeconomic shifts.
◇Treasury Twist = A move in which the U.S. government increases issuance of short-term Treasury bills and uses the proceeds to buy long-term Treasurys, stabilizing yields. The term draws on "Operation Twist," the same type of maneuver when carried out by the Federal Reserve.
