Bitcoin jumped as much as 9.4% to trade around $US77,000 this week, its best weekly gain since March 2023, up roughly 22% in five days.
The US government borrows money by selling bonds, and investors have been demanding higher interest rates to keep lending to it, worried about how much debt it's piling up. To calm those fears, Treasury Secretary Scott Bessent said the government would double its buybacks of its own long term debt. That pushed investors toward riskier assets like Bitcoin and gold instead of safer ones like bonds, and set off a chain reaction: traders who had bet against Bitcoin were forced to buy it back fast to cut losses, wiping out nearly $2.5 billion of bearish bets in three days and fuelling the rally further.
Whether this Bitcoin surge holds is unclear. Standard Chartered flagged its $US100,000 year end forecast could now prove too low, while CoinShares cautioned the rally may stall around $US80,000 without clearer signs the Fed is done raising rates.
The buyback plan doesn't seem to be working yet, though. The 10-year yield rose to 4.73% on Friday, meaning borrowing costs are staying high regardless. Bank of America's Michael Hartnett warned that if this continues, it could mean a weaker US dollar and investors betting against riskier assets, including AI, in the weeks ahead.
This isn't just a US problem. Government borrowing costs have been climbing in places like the UK and Japan too, as investors everywhere grow wary of government debt loads. Because the US dollar underpins so much of world trade and lending, a failed attempt to bring US borrowing costs down would weaken the dollar and ripple through other currencies and markets. If the world's biggest economy can't convince investors its debt is under control, borrowing gets more expensive everywhere.
