Bitcoin surges past US$80,000 as investors hedge against dollar weakness

Bitcoin climbed above US$80,000 on Tuesday (August 25), reaching its highest level in more than three months as a weaker US dollar, intervention in the Treasury bond market and renewed debate over currency debasement drove investors towards alternative assets.

The world’s largest cryptocurrency was trading at US$80,323.24 during Asian hours after touching US$81,237.94, its highest level since mid-May. Bitcoin has gained 28% so far in August and is on course for its strongest monthly performance since November 2024.

The rally accelerated after the US Treasury announced plans to double the size of selected buybacks of long-dated government bonds, while President Donald Trump called on Congress to approve legislation providing clearer rules for the cryptocurrency industry.

Reuters reported that Bitcoin had risen 16% since Trump made those comments, adding a regulatory catalyst to the broader market forces supporting digital assets.

Treasury bond intervention revives debasement debate

US Treasury Secretary Scott Bessent announced that the department would increase selected buyback operations for government securities with maturities of between 10 and 30 years from US$2 billion to at least US$4 billion per transaction.

The move followed a sharp sell-off in the Treasury market that pushed the 30-year bond yield to 5.34%, its highest level since 2007. The programme is intended to improve liquidity and ease pressure in parts of the long-term debt market.

The initial decline in bond yields proved short-lived, however. Yields began rising again as investors continued to focus on inflation, the federal deficit and the growing cost of servicing US government debt.

Normally, higher Treasury yields make dollar assets more attractive and support the US currency. This time, however, the dollar weakened as yields rose, suggesting that investors were demanding greater compensation for fiscal and policy risks rather than simply responding to expectations of stronger economic growth or higher interest rates.

That unusual combination helped revive the so-called debasement trade. The term describes a market strategy in which investors move into assets such as gold and Bitcoin because they fear that government action to suppress borrowing costs could ultimately shift financial pressure from the bond market into a weaker currency.

The US dollar later recovered slightly, but remained close to recent lows. Meanwhile, the yield on benchmark 10-year Treasury notes climbed back to about 4.71%, showing that the expanded buyback plan had provided only limited relief to the bond market.

Buybacks do not remove underlying debt concerns

The Treasury has maintained that the buyback programme is intended to support the functioning and liquidity of the bond market rather than deliberately reduce the dollar’s value.

The department also plans to continue its regular debt-auction schedule. As of August 24, no bonds had yet been repurchased under the expanded programme, which means the immediate market reaction was driven largely by expectations and the signal sent by the announcement.

Nevertheless, investors have questioned whether market intervention can provide a durable solution while underlying fiscal pressures remain unresolved.

If the authorities prevent long-term yields from rising sufficiently to reflect concerns about federal debt and deficits, traders fear that the adjustment could instead emerge through dollar weakness, inflation expectations or greater demand for assets outside the traditional financial system.

Debate over Bessent’s increasingly active approach was also intensified by the Treasury’s participation in a rare co-ordinated intervention with Japan earlier in August to support the yen. Reuters reported that the US side sold euros to purchase yen rather than selling dollars directly.

Gold and Bitcoin attract investors

Gold has benefited alongside Bitcoin, rising to a three-month high as investors sought physical and digital stores of value.

Tim Sun, senior researcher at HashKey Group, said the Treasury’s messaging had reinforced expectations that US policymakers might have limited tolerance for a further rise in long-term yields, particularly before the midterm elections.

Such an environment could remain supportive for Bitcoin and gold, although both assets remain vulnerable to abrupt changes in policy expectations and investor sentiment.

Geoff Kendrick, global head of digital-assets research at Standard Chartered, said the Treasury’s intervention was the type of development that tended to favour Bitcoin because the cryptocurrency was designed to operate outside direct government control of money and financial markets.

Tony Sycamore, a market analyst at IG, said a sustained move beyond the current level could open the way for Bitcoin to approach US$95,000–US$100,000. That remains a market projection rather than a guaranteed price target, and cryptocurrency prices can change sharply within short periods.

The latest rally therefore reflects more than renewed enthusiasm for cryptocurrency. It also highlights growing investor unease over US fiscal policy, intervention in the bond market and the possibility that efforts to contain borrowing costs could come at the expense of confidence in the dollar.

Source: Reuters