Bitcoin Climbs Above $68,000 as Treasury Buybacks Ease Bond Market Pressure

BTC traded at $68,705 at 20:38UTC, up 6.2% on the day, after falling to around $60,000 in June. The move came as long-term Treasury yields declined and the dollar weakened, easing financial conditions that had weighed on crypto and other risk assets.

The Treasury said on 19 Aug that it will at least double the maximum size of liquidity-support buybacks for bonds in the 10-to-30-year maturity range, from $2bn to at least $4bn per operation starting 9 Sep.

The programme buys existing securities rather than increasing long-term issuance and is intended to improve market liquidity after a broad global bond sell-off pushed Treasury yields to its highest level since 2007.

The intervention comes after months of pressure on long-dated government bonds. The 30-year Treasury yield rose from 4.86% at the start of the year to around 5.29% before the announcement, an increase of about 43 basis points, as investors demanded higher returns to hold US debt amid persistent inflation, heavy government borrowing and uncertainty over the Fed's rate path. 

The Treasury is trying to calm a corner of the financial market that affects borrowing costs across the economy. By buying older long-term government bonds, it pushes up their prices and lowers the interest rates they pay. Lower long-term rates can make mortgages and business loans cheaper over time, while also making safe government bonds less attractive to investors. That often encourages money to flow into riskier assets such as stocks and cryptocurrencies.

Yields retreat despite hawkish Fed 

The 30-year Treasury yield fell by about 8 basis points to 5.21% following the announcement, while the 10-year yield also declined.

Later on 19 Aug, attention shifted to the Federal Reserve. Minutes from the Fed's July meeting were less supportive for risk assets. "Many" policymakers believed rates would probably need to rise if inflation failed to move towards the central bank's 2% target, while several had already favoured a hike. The Fed held its benchmark rate at 3.50%-3.75% in July.

Dean Chen, an analyst at Bitunix, had identified long-term rates as an increasingly important driver before the Treasury announcement, writing that Bitcoin "remains sensitive to liquidity conditions, real yields, and long-term Treasury movements."

Rally tests stubborn range

The advance pushes Bitcoin above the narrow range that has contained much of its summer trading, but leaves it still far below last year's $126,110 all-time high.

Bitcoin has spent much of the summer struggling to sustain gains after falling 46% from its October record, making Wednesday's move a break from recent trading conditions rather than a reversal of the broader decline.

Spot Bitcoin exchange-traded funds (ETFs) had already recorded $486.8mn of net inflows across the first two sessions of the week, according to Bitfinex, suggesting demand had begun improving among investors.