This round of BTC increase may be most noteworthy not in the crypto industry, but in the long-term U.S. Treasury bonds.

Written by: Conflux

This round of BTC increase may be most noteworthy not in the crypto industry, but in the long-term U.S. Treasury bonds.

On August 18, the yield on the U.S. 30-year Treasury bond briefly rose to 5.33%, the highest level since 2007. The following day, the U.S. Treasury announced that it would double the scale of its long-term Treasury bond repurchase operations, increasing from $2 billion to at least $4 billion per transaction, covering 10 to 30-year Treasury bonds.

After the news was released, the yield on the 30-year Treasury bond fell by nearly 10 basis points, the dollar weakened, and gold and global risk assets strengthened simultaneously. BTC also rebounded quickly at the same time.

This seems like a typical "yield drop in Treasury bonds → rise in risk assets." But if understood only this way, it underestimates what truly deserves attention in this change.

In the past, BTC resembled a new asset independent of the traditional financial system; now, it is increasingly accepting the macro pricing of the traditional financial system.

Behind 5.33%

Why does the market pay such close attention to the 30-year Treasury bond yield?

Because it is not just an indicator for bond traders.

The yield on U.S. long-term Treasury bonds is, in fact, an important underlying variable for pricing global dollar assets. When the yield on 30-year Treasury bonds rises continuously, it means the market demands higher returns for holding ultra-long-term U.S. Treasury bonds. This may encompass higher inflation expectations, higher term premiums, and may reflect investor concerns about the U.S. fiscal deficit and debt supply. For the U.S. government, this primarily means greater long-term financing pressure. For businesses and investors, it means a higher risk-free return benchmark.

When U.S. Treasury bonds can offer increasingly higher returns, other risk assets must reprove why they are worth holding. Stocks, real estate, and BTC are all included. Thus, the significance of 5.33% on August 18 is not simply that it refreshes a historical high point.

Instead, the market is beginning to worry: Has the U.S. long-term financing cost entered a range that is increasingly difficult to suppress?

The Treasury Department is not "injecting liquidity"

It is precisely because of this that the Treasury Department's expansion of long-term Treasury bond repurchase on August 19 garnered significant market attention.

The market referred to this action as "injecting liquidity," which can be understood in trading terminology; however, from a financial mechanism perspective, it is not equivalent to the Fed's quantitative easing (QE).

The U.S. Treasury is engaging in bond repurchase aimed at improving liquidity in the bond market, managing debt structure, and alleviating some long-term market pressure, rather than creating bank reserves directly like the Fed's balance sheet expansion. Moreover, the size of the new repurchases remains very limited compared to the over $32 trillion U.S. Treasury market. Reuters also explicitly pointed out that this operation is primarily a liquidity support measure, not a solution to the U.S. long-term fiscal issues. Therefore, what is truly important is not how much liquidity the Treasury Department has magically created.

What the market is really trading is a policy signal: when long-term rates rise rapidly, the U.S. government has started to actively intervene to stabilize the long-term Treasury bond market.

In other words, what the Treasury Department changed first was expectations, not the total liquidity in the market. This is also why after the news was released, global long-term bond yields, the dollar, and gold all changed rapidly.

Why BTC can catch it

The question becomes interesting from here.

In the past, there was not such a direct funding channel between changes in U.S. Treasury yields and BTC as there is today. Traditional asset allocation resembled: U.S. Treasury bonds → stocks, dollars, gold, and other traditional assets. BTC traded more within its own crypto market.

But this structure has changed. One of the most important changes is the spot BTC ETF. After the introduction of the U.S. spot BTC ETF, traditional investors no longer need to enter crypto exchanges, manage private keys, or establish dedicated crypto accounts to gain price exposure to BTC through traditional securities accounts.

This means that BTC has, for the first time, a traditional funding entry similar to U.S. Treasury bonds, stocks, and gold. Thus, the originally relatively indirect macro transmission begins to become direct: U.S. long-term rates → dollar asset allocation → ETF funds → BTC.

On August 19, the net inflow to the U.S. spot BTC ETF reached about $517 million in a single day; as of August 20, the influx of funds had noticeably accelerated over several days. The Wall Street Journal reported that from August 17 to 20, the cumulative net inflow into the U.S. spot BTC ETF was approximately $1.6 billion, including about $606 million in a single day on August 20.

This indicates that the rise of BTC can no longer be explained solely by "internal funds entering the crypto circle." Traditional financial funds are becoming increasingly important buyers in the BTC market.

BTC is starting to be macro-priced

This is not the first time BTC has been influenced by macro funds.

After 2020, institutional investors began to build BTC exposure on a large scale through products like Grayscale. At that time, the data disclosed by Grayscale showed that in the fourth quarter of 2020, the funds flowing into its Bitcoin trust were nearly twice the new mining supply for that same period.

But the biggest difference today is that the way funds enter BTC has matured significantly. In the past, institutional allocations of BTC were still a relatively special investment behavior. Today, BTC can already be placed in the allocation framework of traditional asset managers.

This means it is becoming increasingly susceptible to the influences of traditional macro variables. When long-term U.S. Treasury yields decline, the opportunity cost of holding risk-free assets changes; when the dollar weakens, the allocation logic for dollar-denominated assets shifts; and when overall financial conditions loosen, funds may begin to seek high-volatility, high-liquidity risk assets again.

BTC happens to possess the financial entry to take on this portion of funds. Therefore, what is truly noteworthy in this market situation is not "Treasury bonds fell, so BTC rose;" rather, U.S. Treasury bonds are becoming an increasingly important metric in the BTC pricing system.

The changes brought by ETFs are not just about the entry

Many people interpret the significance of BTC ETFs as: traditional funds can buy BTC now. But a deeper change is that ETFs have altered the transmission mechanism between BTC and traditional financial markets.

In the past, when a U.S. macro variable changed, BTC might have had to undergo multiple interpretations by market participants before it would reflect in its price.

Now it’s different. An institution managing global assets can directly adjust BTC exposure through ETFs upon seeing changes in long-term U.S. Treasury yields, the dollar, and risk assets. This has caused a change in the price formation mechanism of BTC. It still has its own supply, on-chain activities, and crypto industry cycles, but at the same time, it has begun to enter a larger asset allocation system.

BTC is no longer just "BTC in the crypto market," but is starting to become a risk asset in the U.S. dollar financial system.

New entry, new dependency

However, this change is not solely positive.

As BTC gains traditional financial funds, it also inherits the cyclical risks of the traditional financial market.

In the past, if BTC dropped, many would first look for reasons within the crypto industry: regulation, exchanges, leverage, funding rates, or on-chain funds. In the future, explaining BTC might increasingly need to consider: whether the long-term U.S. debt cost continues to rise? Is the term premium rising again? Is dollar liquidity tightening again? Are institutional funds increasing BTC allocation, or returning to traditional assets?

This implies that the pricing logic of BTC has actually become more complex. It has secured a larger capital market but has lost some of the space for "independent pricing" imagination.

The problem of long-term bonds has not disappeared

This is also the aspect of the market's reaction that is most worth noting.

On August 19, after the Treasury Department announced the expansion of the repurchase, the 30-year U.S. Treasury yield quickly fell. However, on August 20, the U.S. Treasury market was again met with selling, and yields rose again, with the market beginning to doubt whether the repurchase measures could sustainably alleviate long-term financing pressure. Reuters subsequently pointed out that the Treasury's actions temporarily eased market pressure but did not resolve structural issues such as inflation expectations, fiscal deficits, and long-term debt supply. Even as of August 24, the yield on the 30-year Treasury bond remained close to previous highs, indicating that market concerns about long-term fiscal pressures had not dissipated due to a single repurchase operation.

This also demonstrates that while the Treasury Department can influence the sentiment of the bond market, it is challenging to change the long-term constraints of U.S. finances merely through repurchases. Thus, the real takeaway from this event is not a simple conclusion of "Treasury Department injecting liquidity." Instead, it is a progressively clearer funding chain: U.S. fiscal pressure → long-term Treasury bond yields → dollar and global risk appetite → institutional asset allocation → BTC.

Once this chain is established, BTC is endowed with more traditional funds. However, at the same time, it becomes increasingly unable to detach from the U.S. fiscal and interest rate cycles.

BTC has finally entered the "main table"

In recent years, the market has been discussing a question: Is BTC fundamentally a new independent asset, or another type of risk asset within the traditional financial market?

This round of U.S. Treasury fluctuations may provide an answer that is increasingly leaning towards the latter.

Not because BTC has lost its own attributes. But because it has now established an entry point connecting to the traditional financial system. ETFs bring funds in, institutions place it within the asset allocation framework, and the dollar and interest rates start affecting how these institutions reallocate funds. Thus, the macroeconomic integration of BTC is no longer just a concept. It is becoming a real existing path of capital movement.

This also means that in the future, observing BTC may not only involve focusing on the crypto industry itself. What is genuinely worth paying attention to is through what entry funds will be reallocated when changes occur in U.S. fiscal policy, long-term interest rates, and the dollar system.

Because when BTC truly takes a seat at the "main table" of traditional finance, it gains not only more buyers but also starts to bear the risks that come with the table itself.