This week saw a notable increase in the value of bitcoin and gold, driven by significant movements in the bond market. Bitcoin also benefited from political activity in Washington.

Bitcoin Recovery

Earlier this year, bitcoin’s value dropped from a January high of around $95,000 to less than $60,000 by the end of June. This decline was due to investors avoiding speculative assets and concerns about stalled regulatory progress. However, on Friday, bitcoin’s price rose above $77,000.

Gold’s Price Movement

Gold experienced a peak above $5,300 in January before falling to about $4,000 in June. The drop occurred as rising interest rates made interest-bearing investments more appealing. On Friday, gold rose to $4,661.

Bond Market Impact

On Wednesday, the Treasury Department’s announcement to increase its buybacks of long-term Treasurys significantly impacted the market. This strategy aimed to stabilize bond markets after a period of selling that led to rising yields. Investors became cautious, requiring higher yields to lend money, as lending to the U.S. appeared riskier.

Treasury Secretary Scott Bessent’s approach to lower long-term borrowing rates raised concerns over inflating an already elevated inflation rate. This move could conflict with the Federal Reserve’s inflation-control efforts by raising interest rates.

Rising National Debt

The national debt reached a record $40 trillion, up from $39 trillion in March. Rising energy prices and geopolitical tensions, especially regarding Iran, have heightened worries about inflation. The bond market’s inability to fully reflect risk resulted in a weaker U.S. currency on Wednesday.

The Debasement Trade

This week’s developments shifted investments from the dollar and Treasurys to alternative assets like gold, which rose over 2% on Wednesday. Bitcoin, part of the “debasement trade,” surged more than 20% during the week.

Cryptocurrency Developments in Washington

President Donald Trump, who earned approximately $1.2 billion from crypto holdings last year, urged Congress to quickly enact the Clarity Act, emphasizing its necessity for U.S. competitive advantage. At a crypto conference, CFTC Chair Mike Selig promised to leverage all available tools to facilitate Trump’s crypto advancements. Changes to crypto regulations were proposed to simplify public fundraising for crypto entities.

Since assuming office, Trump has promoted policies beneficial to the crypto industry, counteracting the previous administration’s regulatory restrictions.

Bitcoin’s Price Surge

When the dollar weakens, bitcoin typically gains. However, the explosive growth seen during this week was unusual. Previously, bitcoin’s price was confined to the $62,000-$67,000 range. Investors anticipated bitcoin would remain within these limits.

However, the Treasury’s buyback announcement led to reduced Treasury yields and a weakening dollar, propelling bitcoin past the $67,000 barrier. With U.S. bonds and the dollar less lucrative, bitcoin’s value rose. Many investors who had shorted bitcoin, expecting its price to struggle, had to close their positions as prices climbed.

According to CoinGlass, more than $4 billion in bearish crypto positions were liquidated this week during bitcoin’s rally. As forced purchases drove prices higher, further liquidations likely occurred as values ascended.