Bitcoin enters bull market as Treasury buybacks add $1T liquidity

Arthur Hayes says expanded US Treasury buybacks and up to $1 trillion in potential TGA spending will inject dollar liquidity, putting Bitcoin in a new bull market.

Bitcoin has entered a new bull market as Treasury buybacks inject dollar liquidity, BitMEX co-founder Arthur Hayes said, with $1 trillion in TGA entering markets.

In a Substack post titled "Same Same But Different" published Aug. 24, Hayes wrote that Treasury Secretary Scott Bessent's expansion of long-term Treasury buybacks would inject dollar liquidity into markets, with Bitcoin the first asset to benefit.

Hayes expects the Treasury to keep increasing buyback scale. If roughly $1 trillion held in the Treasury General Account enters markets, financial-market liquidity could expand further. He also raised the possibility of de facto yield curve control if the 10-year US Treasury yield climbs above 5 percent. Maelstrom, the investment firm led by Hayes, has moved to "maximum risk" mode with positions in Bitcoin, Ether, Ethena and Ether.fi.

The macro backdrop is significant. US debt has reached $40 trillion, the federal budget deficit is on track to hit $2 trillion this fiscal year, and debt interest costs alone are $1 trillion annually. Deutsche Bank's George Saravelos described the Treasury's moves as "soft-form financial repression" aimed at containing the long end of the yield curve. Bitcoin posted its second-best week since early 2021, with spot ETF inflows of $307 million on Aug. 21 alone.

The Treasury buyback mechanism operates through debt refinancing rather than direct money printing. The Treasury issues new short-term bonds to raise cash, then uses that cash to repurchase older, less liquid long-term bonds, which are subsequently cancelled. This clears bottlenecks in the Treasury market and optimizes the debt structure without requiring future dollar withdrawal.

The 30-year US Treasury yield recently hit its highest level in nearly 20 years, prompting Bessent to expand the buyback program to $4 billion per operation. The move came weeks after the US and Japan took joint action to boost the yen for the first time in three decades, using the Federal Reserve's FIMA repo facility rather than selling Treasuries.

Liquidity Channel and ETF Flows

The liquidity injection has translated into visible demand for Bitcoin. Spot Bitcoin ETFs recorded $307 million in net inflows on Aug. 21, part of a five-day streak that saw combined Bitcoin and Ethereum ETF inflows reach $492 million. Bitcoin traded at $78,950 as of Aug. 24, up 1.6 percent, according to CryptoRank data, with BTC dominance at 57.1 percent.

The tokenized Treasury market has expanded alongside these moves, with on-chain real-world assets crossing $20 billion. Institutional players have settled live tokenized Treasury transactions, placing this segment directly between crypto capital markets and the macro rates complex driving Bitcoin's move.

Risks and Forward Outlook

Each of these liquidity drivers can reverse independently. Treasury buybacks are operationally finite, ETF inflows can slow as quickly as they arrive, and dollar weakness is not a one-way trade. If the 10-year yield pushes above 5 percent, Hayes said the Treasury could shift toward de facto yield curve control, a more aggressive intervention that would further suppress yields and weaken the dollar.

Hayes warned the rally could bring much larger price swings than in previous cycles. The IMF published research last month suggesting the world is "ripe for another wave" of financial repression, given the conditions historically associated with elevated repression are present today.

For Bitcoin, the transmission chain is clear: Treasury buybacks inject dollar liquidity, ETF inflows convert risk appetite into visible demand, and BTC prices respond. With the second-best week since early 2021 already in the books, the question is whether the liquidity backdrop persists beyond the initial repricing.

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