Bitcoin tops $80,000 as Treasury buyback plan revives debasement trade

Bitcoin rose 3.1% to $79,739 on Tuesday, crossing $80,000 for the first time since May as Treasury buyback plans revived demand for scarce assets.

"The Treasury's intention to bring Treasury yields under control has revived the 'debasement trade'," Alex Kuptsikevich, chief market analyst at FxPro, said. "Eroding confidence in bonds and currencies driven by the policies of their issuing authorities is leading to capital flight from debt and currency markets to other markets."

The rally extended a sharp move that began last week, when bitcoin rose more than 20% in three days — its biggest three-day gain since 2023. Galaxy Research data shows the weekly candle was the largest by dollar amount in bitcoin's history, rising $14,775 from $62,818 to $77,593, a 23.5% gain and the biggest percentage week since March 2023. The move was fueled partly by a short squeeze, with more than $2.7 billion in bearish crypto positions liquidated as prices rose, according to CNBC.

Institutional demand has returned. U.S. spot bitcoin exchange-traded funds attracted $1.92 billion in net inflows last week, their largest weekly haul since October 2025, when bitcoin reached its previous cycle peak. Galaxy estimates the ETF holder cost basis at $84,029, leaving ETF investors roughly 6% below break-even levels. All eyes now turn to this week's core PCE inflation reading, with a firmer-than-expected print potentially supporting Treasury yields and the dollar.

Treasury buybacks fuel the debasement trade

The gains followed the U.S. Treasury's announcement that it would double its purchases of longer-dated government bonds, financing those purchases with more short-term debt issuance. The move briefly pushed yields lower and revived demand for risk assets, while growing concern over inflation and government debt also boosted interest in assets perceived as scarce. The final push to $80,000 came as the Treasury suggested it could tap its nearly $1 trillion General Account — essentially the U.S. government's checking account — to fund the buybacks.

The intervention has drawn criticism. Stanley Druckenmiller, who worked with Treasury Secretary Scott Bessent at George Soros's fund in the 1990s, wrote in the Wall Street Journal that the U.S. should "let the bond market speak," arguing that "governments defending prices against fundamentals always lose." Druckenmiller, who earlier this year predicted the dollar won't be the world's reserve currency in 50 years due to the country's spiraling $40 trillion debt pile, said the $1.8 trillion deficit needs to be addressed.

Can the breakout hold?

Questions remain over whether the breakout can last. Bitcoin has been in a prolonged slump since October, and BTIG noted that a similar surge in January 2023 initially faded before the cryptocurrency found support around its 200-day moving average.

In a note on Monday, Fundstrat said the buying that followed last week's short squeeze suggests bitcoin's rally may be "more durable than a tactical bounce." It pointed to strong inflows into bitcoin and ether ETFs, increased trading, and the creation of more stablecoins, which investors often use to buy cryptocurrencies. Activity in the options market also suggests investors are becoming more confident the rally can last, with traders now paying for exposure to bitcoin gains further into the future rather than short-term price moves.

Fundstrat also noted that bitcoin rallied without fresh purchases from Strategy, the world's largest corporate holder of the cryptocurrency. Strategy has not bought bitcoin for two weeks. If it starts buying again while ETF demand remains strong, that could provide another boost to prices. The company raised $2 billion through MSTR sales last week, according to CoinDesk.

Ether last traded 2% higher at $2,494, while Solana jumped 8.33% to $102.09. The Crypto Fear and Greed Index climbed to 74 on August 25, its highest reading since October 2025. 10x Research analysts led by Markus Thielen declared bitcoin's bull market "officially" here, saying the rally has awakened the "animal spirits" of the market.

This article is for informational purposes only and does not constitute investment advice.