U.S. Treasury bond buyback program doubled; Bitcoin surpasses $69,500

On August 19th, the U.S. Treasury Department announced that it would double the maximum amount per transaction for liquidity support repurchase agreements for U.S. Treasury bonds with maturities of 10-20 years and 20-30 years, increasing it from the previous $20 billion to a minimum of $40 billion. The revised amounts will be in effect from September 9th to November 4th, and the Treasury Department stated that this measure is intended to provide more liquidity to the long-term Treasury bond sector, which continues to experience strong demand from market participants. Immediately following the announcement, the bond market reacted sharply. The yield on 30-year Treasury bonds fell from 5.34%, the highest level since 2007, to 5.19%, and the yield on 10-year bonds also decreased to 4.647%. The interest rate gap between 2-year and 30-year bonds narrowed significantly. The sharp rise in long-term interest rates was the result of a combination of factors, including concerns about inflation, the government's large-scale borrowing, and an increase in the issuance of corporate bonds related to artificial intelligence investments. Bitcoin surged from a low of $64,100 to as high as $69,000 during the trading day, before partially retracing to the $68,000 range. Ethereum rose to $2,100, marking the first time since June that it has recovered above the $2,000 level. This sharp rebound significantly impacted traders who had bet on a decline. According to data from Coinglass, over $400 million worth of cryptocurrency positions were liquidated within one hour, with short traders accounting for approximately $382 million of those losses. Over a 24-hour period, a total of 83,832 positions were liquidated, amounting to over $662 million. The largest single liquidation occurred with a BTC-USD position on Hyperliquid, totaling $18.73 million. Andre Dragos, Head of European Research at Bitwise, described the recent action by the Ministry of Finance as "the first sign of cracks in the system." He stated, "Rising interest rates are already forcing the Ministry of Finance to intervene, and Bitcoin is acting as the macroeconomy's 'canary in the coal mine,' detecting this trend early." Matt Col, Chairman of Strive, argued that Bitcoin could have a strong structural upward momentum if fiscal deficits and increasing debt ultimately lead to a decline in real interest rates, an expansion of liquidity, and a devaluation of the currency. He predicted that the next 5-7 years could provide Bitcoin with the strongest macroeconomic tailwinds it has ever experienced. Experts emphasized that this buyback program is different from the Federal Reserve's quantitative easing. While the Federal Reserve's asset purchases create reserve balances and expand the central bank's balance sheet, the Treasury's buyback aims to improve the liquidity of existing securities and does not reduce the overall government debt. This raises questions about how long this measure will be able to maintain market confidence.