Bitcoin has risen more than 20% in a weekGold prices have also rebounded to exceed $4,600Dollar depreciation bets are spreading again National debt surpasses $40 trillion for the first time in U.S. history
Investors are flocking to gold and bitcoin as anxiety over U.S. government bonds and the dollar grows. While the U.S. government is expanding its purchases of government bonds to curb soaring interest rates on long-term government bonds, the government’s move to find assets whose value is not easily diluted instead of dollars has increased as the national debt has surpassed $40 trillion for the first time in history
According to the Associated Press on the 22nd (local time), Bitcoin surpassed $79,000 during the day on the 21st, the highest level in about three months. It fell from about $95,000 in January to below $60,000 at the end of June, but jumped more than 20% this week alone
Gold also rebounded strongly. Gold prices, which exceeded $5,300 an ounce in January and fell to around $4,000 in June, rose to $4,661 on the 21st. In particular, on the 19th, it jumped more than 4% in one day and exceeded $4,500
It was the U.S. Treasury market that ignited both assets at the same time. On the 19th, the U.S. Treasury Department decided to more than double the amount of buybacks (early repayment) on 10-30-year long-term government bonds from $2 billion to at least $4 billion per session. The market stabilized as long-term government bond sales intensified due to concerns over U.S. fiscal and inflation
Since the announcement of the Treasury Department, interest rates on long-term government bonds have fallen by up to 10 basis points and the dollar has fallen significantly. Coincidentally, on the same day, the U.S. national debt exceeded $40 trillion for the first time in history. After surpassing $39 trillion in March from $38 trillion in October last year, it increased again by $1 trillion in just five months
As the government started to purchase large-scale government bonds at a time when inflation concerns were growing due to rising energy prices following the Iranian conflict, the market became more wary of the U.S. fiscal soundness and the value of the dollar. This is why the so-called “debasing trade” of buying alternative assets such as gold and bitcoin has emerged again in preparation for the fall in the value of legal currencies such as dollars
▲Gold, Treasury Bond Rates, Dollar Shine Again As They Fall
Gold directly benefited from changes in the government bond market. Since gold does not pay interest, rising interest rates on government bonds reduce investment attractiveness, and on the contrary, lower interest rates increase relative attractiveness
This time, the dollar also weakened. International gold prices are expressed in dollars, so if the dollar falls in value, investors who use other currencies can buy gold relatively cheaply. On top of that, the U.S. national debt has surpassed $40 trillion, increasing demand for safe assets
As a result, gold prices soared more than 4% on the 19th when the expansion of the government bond buyback was announced and rose to $4661 an ounce on the 21st. Compared to June, when it was pushed to around $4,000 in June, it has rebounded by 16% in more than two months
▲Bitcoin to support Trump and ‘short squeeze’
In addition to being a “dollar alternative asset” such as gold, Bitcoin’s rise was even greater due to the favorable factors of the virtual asset market
U.S. President Donald Trump held an event related to virtual assets at the White House on the 19th, when the expansion of government bond buybacks was announced, and urged Congress to expedite the “clarity law” that clarifies virtual asset regulations. The U.S. Commodity Futures Trading Commission (CFTC) also discussed ways to ease regulations on virtual assets using existing authority
As prices soared, a “short squeeze” also occurred. Bitcoin has been stuck at $62,000-$67,000 for weeks. Many investors bet on the fall in anticipation of the price not rising further
However, the situation was reversed on the 19th, when the interest rate on government bonds and the dollar fell, Bitcoin immediately exceeded 67,000 dollars. Investors who had been betting on the dip began buying back Bitcoin to reduce losses, leading to a series of short squeezes that pushed prices further
According to virtual asset derivatives analyst CoinGlass, more than $4 billion of bearish betting positions were liquidated during the rally. Bitcoin jumped more than 20% in a week as the rise, which began with anxiety over government bonds and the dollar, coincided with a pro-value asset policy and a short squeeze
