Analysts said the Treasury’s larger buyback program is not the same as quantitative easing, but it helped lower long-term yields from their highest levels in 19 years and triggered a record short squeeze in bitcoin.
A small shift in the U.S. government bond market helped ignite bitcoin’s latest rally, as falling long-term yields gave traders a reason to unwind a large buildup of bearish positions.
The Treasury said it would raise purchases of the longest-dated government bonds to $4 billion per operation, up from $2 billion, sending the 30-year yield lower from 5.34% to around 5.19%.
Bitcoin gained about 25% from Wednesday and moved above $78,000 by Saturday morning in Asia, while roughly $4 billion worth of bearish crypto positions were liquidated over two days.
Treasury buybacks involve the government repurchasing previously issued bonds from investors, mainly to improve trading conditions for older securities and manage the structure of its outstanding debt.
The move differs from quantitative easing because it does not involve the Federal Reserve creating new reserves to buy assets and stimulate financial conditions.
CoinEx chief analyst Jeff Ko said the relatively small program should be viewed primarily as a tool for managing liquidity and Treasury debt, while also signaling some policy support for longer-term bonds.
Higher Treasury yields had become an increasing obstacle for risk assets. When bond prices fall, their yields rise, increasing the returns investors can earn from relatively safe government debt.
Since bitcoin does not generate interest simply by being held, higher Treasury yields can make the cryptocurrency less attractive compared with traditional assets offering relatively low-risk returns.
Grvt CEO Hong Yea said elevated risk-free yields raise the return investors expect before moving capital into bitcoin and other higher-risk assets.
Yea added that when Treasury yields decline, the hurdle for taking on risk becomes lower, potentially creating a more favorable environment for bitcoin and other growth-oriented assets.
Long-term Treasury yields affect borrowing costs across the economy, with higher rates making mortgages and corporate financing more expensive and often reducing demand for assets tied to future growth.
The size of bitcoin’s move suggests the Treasury announcement was likely a trigger rather than the sole reason for the rally, with heavily bearish market positioning amplifying the gains.
MEXC Research chief analyst Shawn Young said crypto traders may have placed too much importance on the Treasury move, while the sharp squeeze indicated that bearish positioning had become extremely crowded.
Young characterized the bond-market development as a temporary pressure release rather than a fundamental change in bitcoin’s macroeconomic outlook.
He argued that the decline in bond yields pushed short sellers out of the market faster than it improved bitcoin’s underlying fundamentals.
Young cautioned that bitcoin’s breakout could come under pressure if the 10-year Treasury yield rises above 4.7% again and the 30-year yield moves toward 5.3%.
Treasury yields have recently shown greater independence from expectations for the Federal Reserve’s short-term interest-rate decisions.
Arch Lending co-founder Himanshu Sahay said longer-term borrowing costs are increasingly moving according to their own dynamics rather than simply following the Fed outlook.
Sahay said bitcoin’s response suggests traders may still lack strong conviction, with the market waiting for additional demand to break decisively out of its range.
He warned that the bigger threat would come if rising long-term yields began pushing up inflation expectations and damaging appetite for risk across financial markets.
The latest bond-market shift also coincided with supportive developments for crypto, including President Donald Trump’s renewed push for U.S. leadership in digital assets and progress on the CLARITY Act.
U.S. spot bitcoin ETFs recorded around $650 million in net inflows during the week, adding buying pressure as traders closed bearish positions.
Ko said bitcoin’s ability to stay above its 200-day moving average near $69,000 would be an important test for the rally.
Turning the 200-day moving average from resistance into support could strengthen the bullish outlook, particularly with ETF inflows providing additional demand.
Bitcoin has now broken above that technical level, but sustaining the rally could prove harder while investors can still earn close to 5% by holding U.S. government debt.
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