Bitcoin tops $80,000 as Treasury buyback expansion fuels liquidity bets

Bitcoin traded above $80,000 on Aug. 25, extending a 23 percent weekly gain after the Treasury doubled long-end buyback limits to $4 billion.

"The next bull market just began," Arthur Hayes, co-founder of BitMEX and chief investment officer at Maelstrom, said in his Aug. 25 essay, linking Bitcoin's rally to Treasury Secretary Scott Bessent's decision to at least double the maximum size of long-end liquidity-support buybacks from $2 billion to $4 billion per operation between Sept. 9 and Nov. 4.

U.S. spot Bitcoin ETFs recorded about $517 million in net inflows on Aug. 19, their strongest daily intake since early May, while the 10-year Treasury yield initially declined toward 4.65 percent. Bitcoin rose from below $65,000 before the announcement to an intraday high above $81,000 on Aug. 25.

The Treasury General Account held approximately $940 billion as of late August, and officials have signaled the department could draw on that balance to fund larger purchases. The first operation under the enlarged limits is scheduled for Sept. 9, with the next quarterly refunding on Nov. 4 — dates that will determine whether Hayes's bull-market call holds.

Treasury's 'Twist' and the $940 Billion Question

Bessent described the buyback program as a "Treasury Twist," selling short-term securities to fund purchases of longer-dated ones. The Treasury authorized up to $38 billion of liquidity-support purchases for the current quarter, alongside up to $25 billion of short-maturity cash-management buybacks, according to its Aug. 5 refunding statement.

The Treasury General Account — the government's checking account at the Federal Reserve — held approximately $940 billion, according to reports citing Treasury officials. Bessent said the department could use some of that cash for bond buybacks without changing its scheduled long-term debt auctions. Treasury's latest borrowing estimate assumes a $950 billion cash balance at the end of September and $850 billion at year-end.

Hayes argued that purchasing older, longer-dated securities could raise their prices and suppress yields, making risk assets comparatively more attractive. He compared Bessent's approach with former Treasury Secretary Janet Yellen's increased reliance on Treasury bills in late 2023, which Hayes believes helped move money-market balances into marketable securities.

What to Watch After Sept. 9

No purchases under the enlarged limits had occurred when Hayes published his essay. The 30-year Treasury yield touched 5.3 percent last week, its highest since 2007, before partially recovering. Gold jumped more than 5 percent last week alongside Bitcoin's 23 percent advance, with silver and platinum also rallying.

Hayes said Maelstrom had moved to "maximum risk," with major exposure to Bitcoin, Ether, Ethena and Ether.fi. He also warned that a continued advance would not prevent steep corrections.

The next confirmed policy milestone is Sept. 9, when the larger long-end buyback limits take effect. Treasury will reconsider future purchase sizes during its next quarterly refunding on Nov. 4. Until actual buyback results, Treasury yields, the TGA balance and Bitcoin's performance are compared, Hayes's bull-market call rests on an expected liquidity transmission mechanism rather than a confirmed policy commitment to monetary easing.

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