Bessent, Treasuries, and Bitcoin

Author: Matt Hougan, Chief Investment Officer at Bitwise

Compiled by: Chopper, Foresight News

There are multiple drivers behind the current rally in Bitcoin and cryptocurrencies. Last week, the U.S. Securities and Exchange Commission (SEC) released a proposed rule on crypto asset regulation, paving a compliance path for emerging crypto projects. The White House convened a meeting with crypto industry executives and sent positive signals to the industry. Following the news, the crypto market rallied sharply, squeezing short sellers and forcing them to cover.

But the most important catalyst came from U.S. Treasury Secretary Scott Bessent, who ignited last week's rally and put Bitcoin on track to refresh its all-time high.

Let's review this week—the most important week for Bitcoin in the past year.

Step One: Intervention in Long-Term Treasuries

Bessent's first move was to announce a plan to intervene in the long-term Treasury market.

Last Wednesday, the Treasury Secretary announced that the Treasury would double the size of its regular buybacks of long-term Treasuries, from $2 billion to $4 billion. At the same time, the 30-year Treasury yield hit its highest level since 2007.

On its own, this move is not significant. The U.S. Treasury issues trillions of dollars in debt each year, so a few billion in buybacks is a drop in the bucket. The key is not the size of the buyback, but the signal it sends. Although Bessent characterized it as a "liquidity adjustment measure," the market interpreted it as an operation to artificially suppress long-term interest rates—a classic case of financial repression. And Bitcoin loves financial repression.

When the government steps in to push down long-term rates, savers earn less on safe assets while inflation erodes purchasing power. Capital tends to flow into scarce assets like gold and Bitcoin. Unsurprisingly, gold and Bitcoin rose in tandem after the news.

Step Two: Doubling Down

Initially, Bessent's operation seemed to work. The 30-year Treasury yield briefly fell from 5.29% to 5.20%, and the benchmark 10-year yield dropped from 4.70% to 4.65%.

But the move didn't last. Yields quickly rebounded to previous highs. It turned out that a $40 trillion debt stock cannot be moved by a $4 billion buyback.

Bessent didn't back down. Instead, he signaled that the buyback size could exceed $4 billion. When that statement still failed to stabilize the bond market, he went further, suggesting the Treasury could tap nearly $1 trillion in the Treasury General Account for larger-scale buybacks.

In roughly 48 hours, market expectations evolved from a $2 billion liquidity operation to the possibility of deploying $1 trillion to backstop long-term Treasuries. This expectation sent shockwaves through the investment community.

Bridgewater founder Ray Dalio publicly stated that investors should allocate to gold and Bitcoin; macro hedge fund manager Stanley Druckenmiller criticized the move as "price controls," saying the negative impact goes far beyond the $4 billion figure; economist Mohamed El-Erian compared the experiment to Japan's monetary policy, which had severe consequences.

This debate brought the $40 trillion U.S. debt problem back into public view, and currency debasement became a hot topic among global economists. Undoubtedly, Bitcoin fully captured this narrative dividend.

Step Three: Weaponizing the Dollar Financial System

Beyond the bond market, Bessent held a press conference on Monday to announce what he called an "economic blitz" against Iran's global financial links.

He described the action as "the Normandy landing in the financial field," saying the administration would push to cut off Iran from the global economy and impose sanctions on all businesses and countries doing business with Iran. "Anyone facilitating money laundering for Iran will be kicked out of the dollar system. The countdown has begun."

This statement brought an implicit fact into the open: access to the dollar financial system is a tool of American power. More importantly, the U.S. is willing to actively wield this weapon.

This scene is reminiscent of the U.S. freezing Russia's foreign exchange reserves after the Russia-Ukraine conflict in 2022, an event that sparked a subsequent surge in gold and Bitcoin.

When countries weaponize payment systems for geopolitical purposes, the market will inevitably seek neutral alternative assets. Bitcoin is the only monetary asset that can be directly self-custodied, is scarce, and can be transferred globally without relying on the banking or custody system of any single political entity. Gold is certainly a good store of value, but it is heavy, difficult to move and divide, and hard to use for transactions.

The more the global financial system becomes a tool of geopolitical games, the higher the value of a neutral financial network.

A Powerful Bullish Environment

In just one week, Bessent, through U.S. government policy actions, inadvertently reinforced two core narratives for Bitcoin: on one hand, he implemented soft yield curve control, which will drive capital into hard assets; on the other hand, he made the world aware that the value of a neutral monetary settlement layer is rising.

Combined with the ongoing global balance sheet expansion, improving Bitcoin access channels, and top asset managers incorporating Bitcoin into standard portfolios, the current environment is extremely bullish for Bitcoin.