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Bitcoin notched up its best week in more than three years and gold was heading for its biggest monthly gain this century as US Treasury secretary Scott Bessent’s surprise intervention in the bond market rattled investors’ faith in the dollar.
The price of bitcoin jumped 6 per cent on Friday and is up about 23 per cent this week at about $77,375, the cryptocurrency’s highest level since May. Gold gained 2 per cent on Friday to value it at about $4,612 a troy ounce, up more than 13 per cent in August. The precious metal is on track for its biggest monthly gain since 1999.
Friday’s moves come after Bessent on Wednesday said the Treasury would “at least” double its purchases of long-term government debt from next month following a sharp sell-off in 10-year and 30-year Treasury bonds that has pushed US borrowing costs to multi-decade highs.
Bessent on Thursday said he was attempting to “bring equilibrium” to the world’s most important bond market. Yet many investors doubt his ability to stem the tide of rising long-end yields.
The shock announcement has pushed investors, worried about simmering US inflation and its $40tn national debt, into so-called debasement trades, in which they buy assets expected to benefit from a weakening dollar. They have snapped up alternative stores of wealth including bitcoin and gold.
“Bessent’s interventions do nothing to deal with fundamental vulnerabilities,” said Matt King, macro strategist and founder of Satori Insights. “No wonder the market is turning back to debasement trades.”
The US dollar is down about 0.8 per cent against a basket of currencies since Tuesday.
“The Treasury’s surprise doubling of buybacks has fuelled a [dollar] sell-off and rekindled a debasement . . . policy unpredictability narrative,” JPMorgan analysts told clients on Friday.
The debasement trade took a significant hit after the US launched its war on Iran earlier this year, triggering a rise in inflation that pushed up short-term US Treasury yields, helping to strengthen the greenback.
A commodities trader said: “Everyone liked debasement — the Iran war threw a spanner in the works but now we’re back to the debasement theme.”
The person added the market had been “gifted a perfect storm” for a return to the debasement trade through a lowering of expectations for interest rate rises “combined with Bessent’s announcement”.
“Being erratic and unpredictable generally translates into higher premiums, which partly explains why the dollar is depreciating,” said Eoin Walsh, portfolio manager at TwentyFour Asset Management.
However, Chris Turner, global head of markets at ING, said Bessent’s intervention should be seen as an attempt to stabilise the bond market and address the risk of a sell-off in longer-dated US debt.
“Some commentators are suggesting that [the weaker dollar demonstrates] a loss of credibility in US policymaking,” he said. “But I think . . . what we’re seeing is [Bessent] taking a strong interest in the long end of the Treasury market.”
Other crypto tokens such as ether, solana and XRP have also rallied, up about 26, 22 and 37 per cent respectively over the past week. Crypto prices had previously been in a prolonged downturn since last autumn, with the price of bitcoin down 31 per cent over the past year.
“It’s momentum begetting momentum,” said Axel Rudolph, chief technical analyst at trading platform IG. “After months of fragile sentiment, the speed and scale of the rebound show just how quickly crypto can turn when liquidity improves and investors rush to chase the move.”
Shares in digital asset groups also jumped this week. Digital exchange Coinbase is up more than 26 per cent, stablecoin company Circle’s shares have climbed 20 per cent and bitcoin hoarder Strategy’s stock has risen 27 per cent.
The sudden move higher in bitcoin’s price led to a short squeeze, analysts said, as traders betting against the cryptocurrency closed their positions. A meeting this week between President Donald Trump and the heads of the top US regulatory agencies and crypto companies was also seen as good news for the industry, which has faced months of stalled debates over a crucial digital assets market structure law.
The Clarity Act, which would oversee the crypto market and make Wall Street institutions more comfortable holding and trading tokens, has been stalled in the Senate as Democrats push for ethics provisions that would prevent government officials profiting from the industry.
Meanwhile, the Securities and Exchange Commission this week released its own proposals to regulate crypto, in a step welcomed by the industry.
“Hard not to be extremely bullish both [on bitcoin] and crypto right now,” said Matt Hougan, chief investment officer at crypto asset manager Bitwise.