Bitcoin and Ethereum saw a significant surge on Wednesday, surpassing $69,500 and $2,000 respectively, following the announcement from the US Treasury regarding increased buybacks of long-dated government debt. The Treasury Department disclosed that it will be doubling the size of its liquidity-support operations for 10- to 20-year and 20- to 30-year securities from $2 billion to at least $4 billion per operation, effective from September 9 to November 4.
This news brought immediate relief to the bond market, which had been grappling with escalating borrowing costs. Consequently, the 30-year Treasury yield dropped to approximately 5.19% from its recent peak of 5.34%, marking its lowest level since 2007. In a similar fashion, the 10-year yield also decreased to 4.647%, while the spread between 2- and 30-year yields narrowed considerably.
Data from CryptoSlate illustrated Bitcoin’s climb from around $64,100 to over $69,000 before settling near $68,000, as yields retreated and risk assets rallied. Ethereum also experienced a surge, reaching above $2,100 and exceeding the $2,000 mark for the first time since June.
The sharp rebound resulted in significant losses for traders who were anticipating further declines. CoinGlass data revealed that over $1.2 billion in crypto positions were liquidated within an hour, with Bitcoin and Ethereum accounting for the majority of the losses. Short traders who were betting against the rally suffered losses amounting to approximately $1.29 billion during the same period.
In the past 24 hours, more than 110,000 traders faced liquidation, totaling over $1.45 billion. The largest single liquidation involved a $32 million ETH-USD position on Bitget.
The move by the Treasury to increase buyback operations aims to offer enhanced liquidity support for longer-dated securities, where market participants have consistently exceeded the department’s repurchase limits. This adjustment reflects the Treasury’s commitment to providing increased liquidity support in sectors with strong market demand.
The recent developments in the Treasury curve have led to a repricing at the long end, driven by factors such as inflation concerns, heightened government borrowing, and increased corporate issuance. These dynamics have directly impacted Bitcoin and other risk assets, with rising long-term yields elevating the cost of capital and making government debt more appealing compared to other investments.
However, Wednesday’s reversal provided some relief as Bitcoin recovered above $66,000. The market’s sensitivity to changes in long-term borrowing costs was evident in the reaction to the Treasury’s announcement.
Looking ahead, market participants are closely monitoring how rising debt levels could influence policymakers’ decisions regarding real rates, liquidity, and currency devaluation. Bitcoin’s response to these macroeconomic factors will be critical in shaping its performance in the coming years, with potential implications for its long-term growth trajectory.
