BlockBeats News, August 21st. The US Treasury Department continues to stabilize the bond market by expanding long-term Treasury repurchases. Treasury Secretary Yellen stated that a single repurchase operation may exceed $40 billion, demonstrating the government's increasing sensitivity to long-term financing costs. However, Federal Reserve officials have not shifted their stance on inflation towards accommodation. Chair Powell believes there is currently no evidence to support an early rate hike, but Governor Brainard argues that an early rate hike may help avoid more aggressive future policy tightening. While the Treasury aims to lower long-term yields, the Fed must prevent overly loose financial conditions, leading to escalating policy tensions between the two.

Of note, the rate decline resulting from Treasury repurchases was short-lived, as long-term yields quickly rebounded. This reflects that the market is still driven by the $40 trillion debt market, a roughly 6% fiscal deficit, substantial government financing needs, and term premium, rather than a single repurchase policy. Therefore, while the Treasury's operations may improve short-term liquidity and market sentiment, it is challenging to solely alter the structural pressure on the US long-term debt supply.

This policy environment is also impacting the US dollar and asset prices. Citigroup has lowered its dollar forecast, believing that the Fed's dovish pivot and Treasury repurchases will weigh on the dollar. In a backdrop of a weaker dollar, gold continues to strengthen, and BTC has surged approximately 19.9% since Monday, reaching around $75,400. Short positions worth $1.08 billion were liquidated within 24 hours, indicating significant short squeeze. Concurrently, cryptocurrency ETFs recorded a net inflow of approximately $859 million, with BTC ETFs seeing $606 million inflow and ETH ETFs seeing $220 million inflow, suggesting that this rally is not just a leveraged short covering but also involves spot capital re-entry.

Therefore, what is truly worth monitoring for BTC at the moment is not merely expectations of rate hikes or cuts but whether the combination of the US dollar, Treasury yields, and liquidity can sustain the current setup. If long-term yields are suppressed by Treasury operations, the dollar continues to weaken, and ETF funds maintain inflows, BTC still has the conditions to remain strong. Conversely, if the $40 trillion debt and inflation pressure drive up the term premium again, forcing the Fed to adopt a more hawkish policy, the current high-beta crypto market will also face repricing pressure.