Bitcoin (BTC) 'Quiet' Despite US Treasury Bond Buyback... Why?

▲ Bitcoin (BTC), Dollar (USD), Treasury Bond/AI Generated Image

Although the U.S. Treasury increased the scale of its bond buyback, Bitcoin (BTC) did not show the explosive reaction seen last month.

According to crypto news outlet CryptoPotato on September 10 (local time), the U.S. Treasury unveiled a buyback plan to repurchase up to $6 billion in 10- to 20-year maturity Treasury bonds. This follows last month's announcement to expand the long-term bond buyback limit from $2 billion to at least $4 billion per session, further increasing the scale. However, the market reaction was the opposite. The U.S. 10-year Treasury yield rose instead, and Bitcoin failed to establish a strong upward trend.

Just a few weeks ago, the same Treasury action sparked a surge in Bitcoin. When the Treasury announced on August 19 that it would at least double the size of its long-term bond buyback, the 30-year Treasury yield plummeted from 5.34% to 5.20%. Bitcoin at the time surged from around $64,400 to break $70,000, and subsequently rose to $80,000. At that time, net inflows into Bitcoin spot ETFs and high open interest also amplified the rise.

This time, the difference is attributed to the market already being aware of the Treasury's expansion policy. The expansion of long-term bond buybacks was announced last month, and the September implementation schedule was disclosed in advance. The $6 billion scale was also not perceived as a shock that significantly exceeded market expectations. It seems that whether long-term interest rates actually fall has become a more critical variable than the bond repurchase itself.

The macroeconomic environment has also become less favorable than last month. Long-term Treasury yields continued to rise even after the Treasury's announcement, with the 10-year yield soaring to around 4.85%. Surging oil prices and Middle East tensions fueled concerns about a resurgence of inflation. This is the backdrop against which the market raised its vigilance ahead of the Consumer Price Index (CPI) and the Federal Reserve's (Fed) monetary policy decision.

Ultimately, even with the same policy, its impact on Bitcoin varied depending on market conditions. In August, a decline in Treasury yields, an influx of funds into Bitcoin spot ETFs, and short position liquidations coincided. This time, however, Treasury yields rose, offsetting the effect of the expanded buyback. The direction of long-term interest rates and inflation indicators have emerged as key variables that will determine Bitcoin's next move, more so than further actions by the Treasury.

[Article Summary]

-The U.S. Treasury expanded its long-term bond buyback to up to $6 billion, but Bitcoin did not show the same sharp rise as last month.

-In August, a combination of falling Treasury yields, ETF fund inflows, and short position liquidations caused Bitcoin to rise from around $65,000 to $80,000.

-This time, long-term Treasury yields rose instead, limiting the effect of the Treasury's expanded buyback.

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