📈 The Reason Behind the Explosive Rally - and Why I Think It’s Wrong in the Medium Term

Yesterday, the U.S. Treasury announced that it would double the size of its buyback program for 10–30-year bonds, from $2 billion to $4 billion.

This happened against the backdrop of yields on these securities rising to approximately 5.3%, the highest level since 2007. Just a minute later after announcement, BTC started moving higher on the terminal, and the rally continued throughout yesterday and today. In just over 24 hours, Bitcoin rose from $63K to $72.9K.

Why do I think the price went up?

🔹 The market interpreted the move as a signal that such high yields are unacceptable and that the authorities are prepared to intervene and prevent them from rising further - not only verbally, which has almost stopped working despite Trump’s and Bessent’s statements, but also through concrete action.
🔹And, of course, there was a short squeeze. After an almost entirely stagnant summer and a broad negative trend, a large accumulation of short positions had built up. The violent reaction was driven by short covering. The news is already reporting another round of record liquidations.

There is no more aggressive bull than a short seller trapped by margin requirements. 🐂

There are other factors as well, but these are the ones I consider the most important.

Why do I think this rally is short-lived and is essentially just a correction within the broader downtrend in Bitcoin:

🔹This move may temporarily push yields lower, but fundamentally it changes very little - especially given the tiny size of the program. $4 billion is nothing in the context of the U.S. bond market. Yields were rising for a reason: the U.S. has a high level of government debt and elevated inflation expectations.
🔹This is a buyback by the U.S. Treasury, not the Federal Reserve with its unlimited money-printing capabilities. Essentially, the Treasury is spending its own funds on the operation, albeit a relatively small amount.
🔹Similar problems exist not only in the United States but also in other major economies. Look at Japan, with its extraordinary debt-to-GDP ratio, rising yields, and weakening yen. France is facing serious challenges as well.
🔹The situation around the Strait of Hormuz has not improved, oil prices are rising, and this certainly does not help bring inflation down. Oil is the blood of the economy. 🛢

Everything described above increases pressure on asset prices rather than reducing it. The probability that one of these factors will eventually trigger a crisis is now higher than it was before.

That said, I may be wrong - and a solution may eventually be found. I’m completely fine with that.
Perhaps I’m looking at everything too globally and over too long a time horizon, when I should be focusing on shorter-term moves and enjoying them as profitable opportunities.

But for now, I remain convinced that we will see Bitcoin trading well below $60K this autumn. I’m sticking to my plan, which is based on previous market cycles. Although, to be honest, after such a strong move against my expectations, my confidence has weakened somewhat.

Still, there is time. ⏳

Originally posted on Telegram channel.