Bitcoin rose 20% this week, its strongest performance in more than two years, as Treasury bond buybacks announced by the U.S. Treasury Department weakened the dollar and lifted risk assets globally.
The Treasury's decision to upscale bond buybacks for longer-term debt sent yields lower and compressed the dollar index. Treasury Secretary Janet Bessent expanded the balance-sheet operations to manage debt relief rather than through passive debt issuance alone.
Bitcoin last saw a comparable weekly gain in March 2024, nearly 2.5 years ago. The price move brought Bitcoin past $75,000 in Asian trading Friday, according to pricing data from major exchanges. The cryptocurrency has now recovered from its August 5 dip below $49,000, when it posted its worst day since 2022 following weak jobs data and unwinding of carry trades.
Gold also rallied on the dollar weakness, though less sharply than Bitcoin. Precious metals and cryptocurrencies both benefit when the dollar weakens because it lowers the relative cost of dollar-denominated commodities for foreign buyers and reduces the opportunity cost of holding non-yielding stores of value.
The bond buyback operation targeted longer-duration Treasuries, a category that has been volatile as investors repriced rate-cut expectations. By purchasing bonds directly, the Treasury reduced the quantity available in the market and compressed yields, which typically move inverse to prices. Central banks and large asset managers had been net sellers of longer-dated Treasuries for months over concerns about supply and fiscal trajectories.
Bitcoin's move came as real yields compressed. Equity markets in Asia and Europe also posted gains Friday. The cryptocurrency remains sensitive to dollar strength and real interest rates, which determine the carrying cost of speculative positions.
Bitcoin's 20% weekly gain represents a 40% swing from its August 5 low, a volatility pattern typical of capitulation reversals when liquidation cascades exhaust sellers. The asset has now recovered all losses from the week of August 4-9, when outflows from U.S. spot Bitcoin exchange-traded funds totaled $2.8 billion.
The number to watch is whether the Treasury sustains bond buybacks through September or reduces them as fiscal conditions shift. If Bessent pauses the operation, the dollar could strengthen again, reversing the tailwind that sparked this week's rally.
