Traders bet bitcoin was stuck below $67,000. The Treasury blew that trade up in one afternoon

Bitcoin and gold surged this week, with the cryptocurrency also benefiting from developments in Washington. Bitcoin had plummeted from a January peak of around $95,000 to below $60,000 by the end of June. Concerns over the lack of regulation and falling prices led investors to shun speculative assets earlier in the year. On Friday, Bitcoin surged above $77,000, while gold hit over $5,300 in January but fell to around $4,000 in June as rising rates made interest-bearing investments more appealing. Gold rebounded to $4,661 on Friday.

The first major boost came on Wednesday when the Treasury Department announced plans to significantly increase its buybacks of long-term Treasurys, or government debt. Simultaneously, President Donald Trump urged Congress to expedite crypto legislation, expressing his $1.2 billion earnings from crypto investments the previous year. The Treasury's move led to a dollar sell-off and a rise in gold and Bitcoin's value as investors sought alternative assets. This can be understood in the context of several developments.

The Treasury's intervention in the bond market, even if temporary, raised questions about whether the government was attempting to lower borrowing costs despite inflationary pressures. Treasury Secretary Scott Bessent aimed to lower long-term borrowing costs, which could support inflation amid elevated inflation rates. Bessent's actions could complicate the Federal Reserve's efforts to combat inflation by raising interest rates.

The national debt surpassed a record $40 trillion on the same day as the Treasury's actions, a figure recorded five months after hitting $39 trillion in March. It had already topped $38 trillion five months earlier in October. Anxiety about inflation, particularly due to the Iran conflict and soaring energy prices, led investors to seek refuge in alternative assets such as gold, which rose over 2% on Wednesday. The "debasement trade," where investors move into assets that depreciate the currency, now extends to Bitcoin.

Bitcoin jumped over 20% this week after Bitcoin became stuck between $62,000 and $67,000 for weeks, with investors betting it would remain stagnant. However, on the day Treasury announced its buybacks, Treasury yields dropped, the dollar weakened, and Bitcoin broke above $67,000. Treasury's actions negatively impacted the returns investors could earn from U.S. bonds and the dollar, while Bitcoin's price surged.

This led to the liquidation of more than $4 billion in bearish crypto positions during the rally, as investors closed their short positions and bought back the digital asset, adding to Bitcoin's price rise.