NDV Research Observation ｜ Jason

This article discusses macroeconomic mechanisms and public data, does not involve any fund products, and does not constitute investment advice or return promises.

In the last issue, when discussing Bitcoin, I included a statement: What Bitcoin lacks right now is not a reason to stop falling, but a catalyst for upward movement. What is that catalyst? I said I don't know, I don't have a crystal ball.

As a result, in less than two weeks, the market handed over the answer. Moreover, it came from a direction that hardly anyone had bet on.

On August 19, Eastern Time, Bitcoin rose by 8.7% in a single day, reaching a peak of around $69,700 during trading, touching the $70,000 mark for the first time since June. On the same day, about $1 billion worth of short positions were forced to close—some statistics say it reached $1.4 billion. Short positions are bets where people borrow currency to sell, betting that it will fall: when the price rises, they must buy back the cryptocurrency to repay, making the price go up even further, leading to more buybacks. This situation is referred to as a short squeeze. The $1.4 billion short squeeze is the most brutal single-day short position massacre in the digital assets market in recent months.

So the question arises: Who is the one igniting this?

It is not the Federal Reserve. It is the U.S. Treasury.

1. The Treasury Took Action

On August 19, Treasury Secretary Bessent announced that the repurchase scale of long-term U.S. debt would be doubled. Previously, the Treasury bought back a maximum of $2 billion of 10 to 30-year old government bonds per operation; now, it changed to at least $4 billion each time, with the number of operations per quarter increasing from twice to four times, starting on September 9.

Why? Because prior to this, the yield on 30-year U.S. Treasury bonds had surged to its highest point since 2007—the cost for the U.S. government to borrow money had reached its most expensive level in 19 years. The background is well known: on one side, there are concerns about escalating U.S.-Iran conflicts; on the other side, there is the market’s distrust toward the increasing borrowing by the U.S. Treasury. The Treasury couldn't sit still and decided to step in and buy back its own old long-term debt.

Where does the Treasury get the money to buy bonds? It does not have a money-printing machine; the money-printing machine is in the hands of the Federal Reserve. Its method is: issue new short-term government bonds to borrow money, and then use that money to buy back its own long-term government bonds—borrowing short on one hand and buying long on the other.

Doesn't that sound a lot like quantitative easing (QE, the operation where central banks print money to buy bonds and lower interest rates)? Wall Street argued about this that day, and there were three voices:

The first faction said it doesn't count. An analyst from TD Securities stated directly: The Treasury cannot print money, the money used to buy long-term bonds is borrowed from issuing short-term bonds, which is just swapping long-term debt for short-term debt, moving money from one pocket to another, at most it's a fiscal version of the Fed's "Operation Twist" from 2011.

The second faction disagrees, with some media directly naming it: QE Lite, a lightweight version of quantitative easing. The logic is: regardless of whether the money is printed or borrowed, the key is the effect—henceforth, there is an unknown buyer under long-term U.S. debt who doesn't care about price. This is functionally the same as QE; the only difference is maintaining the Fed's independence on the surface.

The third voice is harsher: some long-established financial blogs said this is just a trick, issuing bonds and buying back the same bonds to come back to the starting point, with the only real effect being to manage the bond market with words—telling all short-sellers of long-term bonds that the Treasury is watching you.

The same action, three interpretations. But what is important is never which interpretation is more theoretically correct; it is which one the market believes—and the market had already voted with price that day: once the announcement was made, long-term bond yields went down, the dollar weakened, gold rose, and Bitcoin surged. Yields down, dollar weak, risk assets rise, this whole sequence of actions is the market saying with real money: we believe this is easing.

My view: I lean towards the functionally equivalent faction. This is a disguised QE.

2. A Layer More Important than Up and Down

This matter has a deeper meaning.

Long-time listeners remember that we have talked about how the current Federal Reserve Chairman Warsh took office with a political mission. And this action indicates: even the Treasury isn't waiting for the Federal Reserve anymore. Pressing interest rates is, by division of labor, the job of the central bank; now the Treasury is rolling up its sleeves to do it itself. The boundary between those managing the money bag and those controlling the money-printing machine is becoming blurred—this phenomenon has a scholarly name called fiscal dominance: the government’s borrowing demand is too large, so large that monetary policy must accommodate fiscal policy.

Zooming out: a government whose borrowing cost rises to the highest level in 19 years chooses not to borrow less or be frugal but instead steps in to press interest rates down to continue borrowing. This is not a commitment to fiscal discipline but a farewell to fiscal discipline. This is not a new phenomenon in history: after World War II, the U.S. did something similar, keeping interest rates low for a long period, allowing inflation to gradually dilute debt, what textbooks call financial repression—in simple terms, allowing savers to pay the bill for borrowers. Each time reaching this point, the main characters of the story are the same assets: those that cannot be printed out.

This isn't abstract for ordinary people: it relates to where mortgage rates are headed, how much the dollars in your hands are worth, and whether the long-term stories of assets like gold and Bitcoin still hold.

3. First, A Splash of Cold Water

An 8.7% increase in a day, how much of it is from real buyers? To be honest, a considerable portion is not; it is from short sellers being forced to buy back. The rise driven by a short squeeze is like fireworks: bright but not sustainable. Therefore, August 19 alone does not prove a bottom.

There is an old market rule: the longer an asset has been falling, the more severe the short squeeze will be. The longer it falls, the thicker the short positions betting on it to continue falling become, like dry firewood that ignites with a spark. Thus, the first wave of increases towards the end of a bear market is often particularly frightening and irrational—not due to new buyers going wild, but because old short sellers are scrambling to escape. Judging the nature of the market based solely on a day's price increase is always insufficient; after the dust settles, we need to see if anyone has actually come to add fuel to the fire.

What is truly worth watching is another thing: trading volume.

Since August, Bitcoin's spot market trading volume (in terms of quantity) has dropped to its lowest level since 2019—a seven-year low. In the last issue, I mentioned that this time Bitcoin returned to a low position, and hardly anyone was discussing it; this silence itself is information. Now that silence has numbers attached to it.

Translating the record-low trading volume into plain language: those who wanted to sell have basically sold out, and those who want to buy have not yet entered the market, putting the market in a state of apathy. Looking through history, each major bottoming area shows this pattern—busy tops and quiet bottoms, it has always been like this.

The emotional aspect reflects the same picture. The last time Bitcoin was at this price level, the screens were filled with "It's over" and "It's liquidated"; this time, returning to a similar position, even discussions about "Is Bitcoin dead?" are scarce. All sorts of bearish narratives—it's worthless, quantum computing is coming—each round recycled under a new disguise, I've heard for eight years; this time, even storytellers have become fewer.

There's also the other half of the information on "lowest since 2019": the last time the spot market was this quiet was in 2019—before the last major market surge, when no one paid attention to Bitcoin. I am not saying history will necessarily repeat itself; there are only a few samples; but at least, record-low trading volumes never appear at the top, only in places where no one wants to buy. This historical pattern has never been broken.

4. Smart People have Split Into Two Halves

The bearish camp is currently the mainstream in institutional research. VanEck (an American asset management company managing hundreds of billions) released a report on August 19: 8 out of 12 surrender signals are lit, but clarifying that this is a bottoming process, not a confirmed bottom. On-chain data company Glassnode: 45 indicators are in surrender status, the duration is the longest since the FTX collapse in 2022, and long-term holders sold 356,000 coins in the past 30 days. Digital asset investment bank Galaxy predicts the bottom will be seen in the fourth quarter, around $40,000 to $46,000, and a panic scenario could see $28,000. There are also seasonal theories: Bitcoin has fallen in August for the past four years; betting it will fall this year too, targets are set at $58,000 to $62,000; and another group of well-known cycle analysts places the bottom in September to October. This faction even has a real indication: while spot volumes are low, the futures open interest is rising, showing that the recent fluctuations are mainly driven by leveraged short-term traders; and funds inflow into the Bitcoin spot ETF (a channel for ordinary people to buy Bitcoin through brokers) is also slowing down—true long-term buyers are not yet entering the market in large numbers.

The bullish camp has become noticeably louder after August 19, with a single logic: the liquidity logic has just been validated—the Treasury suppressing yields, the dollar weakening, and risk assets benefiting, while Bitcoin is historically the most sensitive asset to liquidity. The catalyst has already arrived.

One side claims that surrender signals are not fully lit yet and anticipate one last drop; the other side says a reversal has occurred, and those waiting for a pullback will continue to wait. Both sides have valid points. This reflects the current market's true state: in front of the same set of data, smart people are divided.

By the way, here’s a useful practice: when facing two opposing factions, don’t rush to pick a side; instead, reverse the question—what would each side see first if they were wrong? If the bearish camp is wrong, you would see prices not reaching the low point they're waiting for; if the bullish camp is wrong, you would see this rise follow without volume and gradually retract. Write down the conditions for both sides’ potential errors and let the market reveal the answers over the next few weeks. Judgments are one thing, facts are another—let facts be the judge. Moreover, both sides are watching the same date: September 9, when the doubling of repurchases officially begins—starting from that day, "there's a buyer under the long end" will change from just an announcement to a real occurrence happening every few days.

5. "Is This It?" is the Wrong Question

In the last issue, I made an analogy: gold and Bitcoin are waiting in the same line for the same examiner; gold has already finished the exam while Bitcoin is still squatting outside the examination room waiting. Now the analogy can be extended: on August 19, the examiner called Bitcoin in, and the Treasury's action is akin to handing it its exam paper. The exam has begun—this is entirely different from squatting outside and waiting.

So, has Bitcoin reached its end? This is probably the question I’ve been asked the most in the past two weeks.

My approach is to break it down into three smaller, answerable questions: First, has the selling pressure cleared—did those who sold 356,000 coins finish selling? Second, is this catalyst a real ignition, or just a fake move in a short squeeze? Third, is there another potential landmine in this market?

Why these three questions? Because throughout history, every major bottoming has been at moments when three conditions are met: no one wants to sell anymore, there’s a new reason to buy, and no surprises to scare everyone away again. Missing one, the bottom doesn't hold. This checklist isn’t something I invented this time; it’s an old tool I use every cycle.

For these three questions, I have my own answers. Moreover, my answers differ from the mainstream institutional narrative—long-time listeners know, my habit has always been to stand on the less crowded side, and this time is no exception. The complete reasoning process, answers to each question, and my final judgment of Bitcoin’s current position are all included in this issue's paid section. The paid section was recorded by myself holding a phone, chatting casually, without a script—while discussions of mechanisms can be precise, making a disclosure should not be overly beautified. The price is just the cost of a cup of coffee; consider it my treat, a way to make a friend.

Finally, whether or not you listen to the paid section, let me offer you an observation tool: pay attention to the combination of trading volume and price. A volume-diminished downward trend indicates that no one is buying, so there's no need to panic; a large trading volume breaking through previous lows indicates someone is smashing without regard for cost—completely different signals. The same candlestick can tell two different stories when volume is present or absent. This tool is not only useful for Bitcoin but also applicable to stocks, gold, or anything with public trading volume.

Pass this article on to that friend who keeps asking you "Is Bitcoin dead?"—he's been waiting for this topic for a long time.

Disclaimer: This article is a compilation of research opinions aimed at helping readers quickly understand the related content. This article is for reference only and does not constitute any investment advice, nor does it constitute an offer to sell any securities or an invitation to subscribe.

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