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U.S Treasury’s planned bond market intervention seems to have reignited the debasement trade as Bitcoin flipped bullish.
Notably, the crypto asset reclaimed the 200-day Moving Average (a crucial long-term market structure test) for the first time since dropping below $100K last November.
Back in Q2, $BTC’s rally and attempt to reclaim the key 200-day MA (currently at $69K) were rejected. As such, the recent breakout above the level “might mean something,” according to analyst Scott Melker.
Can Bitcoin climb higher?
From an on-chain perspective, the short-term holder (STH) cost basis at $67K was also reclaimed. According to analyst Frank, this suggested that bulls may be “taking back control of the market.”
However, Glassnode noted that a true trend reversal could be confirmed if the True Mean level of $76K is also reclaimed. Otherwise, the market was still in the capitulation stage.
So, can the bond intervention usher in the onset of the next crypto bull run?
Bitcoin: Impact of bond market intervention
On the 19th of August, the U.S. Treasury announced plans to double long-end bond buybacks.
Starting on the 9th of September, buybacks would rise from $2 billion to $4 billion. The program covered longer-dated Treasuries, including 10-year and 30-year coupons. The move aimed to reduce borrowing costs as Treasury yields climbed.
The 30-year yield exceeded 5%, while the 10-year yield traded above 4.6%.
In other words, the Fed will print more money, which could increase inflation and liquidity too. Like gold, $BTC rallied +7% and reclaimed $69K on the update.
The two and other scarce assets have always been viewed as a debasement hedge. Especially when it comes to government spending-driven inflation and reckless fiscal debt.
In fact, Bitcoin and gold’s positive correlation has hit record levels last seen in 2024, reinforcing a regime shift and the debasement trade.
Since a rising tide lifts all boats, the rest of the crypto market benefited from $BTC’s surge and amplified short squeeze. In fact, ETH rallied 17%, as SOL and XRP pumped 10% on Wednesday.
If the debasement trade holds, the trend may extend and lift the sector higher, according to Tushar Jain, managing partner at crypto VC firm Multicoin Capital.
The monetary debasement trade is back and is the catalyst for a market regime change. I expect substantial crypto outperformance for the rest of the year.
Overall, the positive $BTC-gold correlation signals a regime shift, and the U.S Treasury move could be a great catalyst for the crypto market, according to analysts.
Final Summary
- U.S Treasury to double bond market intervention, sending $BTC surging 7%
- $BTC-gold positive correlation hit a 2-year high, signaling the debasement trade may be back