Bitcoin (BTC) topped $80,000 for the first time in about three months as the U.S. Treasury moved to expand the dollar stablecoin market while pushing down long-term Treasury yields. Expectations for passage of the CLARITY Act, which sets the U.S. market structure for cryptocurrencies, and inflows of institutional money into spot bitcoin exchange-traded funds (ETFs) also supported the gains.
BTC broke through $80,000 on the 25th and traded around $80,500 to $81,000, according to the global cryptocurrency data site CoinMarketCap. It was the first time BTC had risen above $80,000 since May 15. After sliding to around $58,000 in late June and early July, BTC has rebounded about 38% from that low. Its gain this month is about 28%.
Analysts point to the U.S. Treasury's bond management strategy as a factor behind the recent rally. The Treasury decided to double the size of its long-term bond buybacks from its earlier plan. The Wall Street Journal reported on the 24th that this long-term bond buyback policy and the easing of cryptocurrency rules are not separate measures but linked under the same economic goal.
The approach the U.S. government envisions is to raise money by issuing more short-term Treasuries and use it to buy long-term Treasuries. The aim is to lower the 30-year Treasury yield, currently around 5.2% to 5.3%, and ease pressure on the long-term bond market. Treasury Secretary Scott Bessent described this on the U.S. business network CNBC as a "Treasury Twist." The term signals that the Treasury is pursuing a policy similar to the Federal Reserve's "Operation Twist," in which the central bank sells short-term Treasuries and buys long-term ones to push down long-term rates.
The key question is who will buy the increased supply of short-term Treasuries. The market expects dollar stablecoins to absorb this demand. Stablecoin issuers hold large amounts of short-term U.S. Treasuries as reserve assets backing the dollars users deposit. The more dollar stablecoins are issued, the greater the structural demand for short-term Treasuries. The Journal noted that Bessent has projected the stablecoin market could grow to as much as $4 trillion, adding that stablecoins could help expand demand for short-term Treasuries.
The cryptocurrency market sees this policy combination as capable of creating an environment favorable to risk assets. If long-term Treasury yields stabilize and the dollar weakens, the likelihood grows that money will shift into cryptocurrencies such as BTC. In fact, the dollar weakened after the Treasury announced the expansion of its long-term bond buybacks.
Institutional buying is also reviving. According to the cryptocurrency outlet CoinDesk, U.S.-listed spot bitcoin ETFs drew about $1.9 billion in net inflows last week, the largest weekly net inflow since October last year.
The market is also watching for the possibility that the rally will prove more than a short-term rebound. One cited reason is that prices rose even though Strategy, the world's largest corporate holder of BTC, has not made additional purchases recently. Fundstrat said on the 25th that "buying continued even after last week's short squeeze — repurchasing assets that had been borrowed and sold — pushing prices higher," and analyzed that "this may not end as a short-term rebound but could extend further."
Some caution, however, that it remains to be seen whether expectations for the policy will translate into actual institutional change and expanded market liquidity. Industry figures see the current situation as similar to March last year, when the U.S. government announced a strategic bitcoin reserve. Prices rose then on policy expectations as well, but fell again when the specifics fell short of market forecasts.
Yoon Seung-sik, a director at Tiger Research, said, "With the U.S. heading into midterm elections in November, a pro-cryptocurrency policy stance is likely to continue," adding, "If no major variables emerge on the macroeconomic front, bitcoin's upward trend could also continue."
Treasury Twist: A policy in which the U.S. government issues more short-term Treasuries and uses the proceeds to buy long-term Treasuries to stabilize yields. The term draws a comparison to the "Operation Twist" carried out by the Federal Reserve.
