UPDATE: The article has been updated to reflect the most recent movements

Bitcoin’s price suddenly jumped toward $72,500K earlier today as investors reacted to an unexpected intervention in the US government bond market.

As CryptoPotato reported, the price tapped almost $73,000, leaving more than $3 billion in liquidated positions across the derivatives market. This is pretty much the highest BTC has traded since the middle of June.

The catalyst for that move appears to have been an announcement on behalf of the US Treasury Department, which will be doubling (at least) the maximum size of liquidity-support buybacks for longer-dated government debt, raising them from $2 billion to at least $4 billion per operation. The changes will start on September 9 and remain in place through November 4.

Why the Treasury’s Move Matters for Bitcoin

The announcement came after increased stress in the bond market. The 30-year Treasury yield touched 5.34% on Tuesday, which was its highest level since 2007. This came amid persistent inflation concerns, heavy government borrowing, and worries about the overall US fiscal outlook.

As Politico reported, the government is stepping up purchases of older Treasury securities as pressure builds in the long end of the market. And the market’s reaction was immediate. The 30-year yield dropped toward 5.20%, while the 10-year yield also moved lower.

This prompted a move in stocks, gold, and crypto, all of which moved up, while the dollar weakened. Lower bond yields can make non-yielding and riskier assets relatively more attractive.

Did the US Government Finally Blink?

In a detailed thread on X, the Kobeissi Letter described the decision as the intervention it had been expecting since July 31. That was when long-term US borrowing costs were already reaching very high levels – unseen since before the global financial crisis (as mentioned above).

TKL argued that the government has a strong incentive to prevent yields from rising indefinitely because its interest bill is becoming increasingly expensive.

Still, the program should not be confused with Federal Reserve quantitative easing (QE). Treasury buybacks are usually designed to improve trading liquidity in older securities, and the additional purchases remain small relative to the enormous Treasury market.

For Bitcoin’s price, however, this entire ordeal showed exactly how sensitive the asset is to changes in yields, the dollar, and expectations for financial-market liquidity. It’s true that many tech stocks also moved up throughout the past few hours, but none of it has been as pronounced as the jump in crypto prices.

Source: CryptoPotato