Key Takeaways
- Bitcoin surged past $81,000 as rumors of U.S. Treasury bond buybacks fueled a broader market rally.
- Coinglass recorded $282 million in bitcoin short liquidations, driving 62% of crypto market margin wipes.
- Investor Stanley Druckenmiller warned Treasury Secretary Scott Bessent that yield capping risks market trust.
Short Sellers Squeezed for $282 Million in Liquidations
Bitcoin continued its rally, breaching $81,000 as optimism grows over a broader bull market. The digital currency’s latest surge came hours after it nearly crossed $80,000 on reports that the U.S. Treasury plans to use a $950 billion General Account to fund bond purchases.
According to data from Bitstamp, bitcoin peaked at $81,255 at 10:45 p.m. EST on Aug. 24 before retreating and consolidating above $80,500. The jump of more than 4% lifted bitcoin’s market capitalization to nearly $1.62 trillion and narrowed its year-to-date losses to 8%, down from 9.5% less than 12 hours earlier.
The bitcoin price action was brutal again for traders shorting the cryptocurrency. Coinglass data showed the price action wiped out $177 million in short bets in four hours, compared with $4.5 million in long bets. These liquidations pushed bitcoin’s short liquidations in 24 hours to $282 million—approximately 62% of all liquidated short positions across the cryptocurrency market.
Treasury yields dipped on reports the U.S. Treasury may tap its nearly $1 trillion account to fund bond buybacks. CNBC reported the 10-year yield fell over 3 basis points to 4.704%, while the 30-year yield dropped more than 4 basis points to 5.234%, pulling back from last week’s multi-decade high.
Meanwhile, some market watchers suspect Treasury Secretary Scott Bessent intends to trigger a short squeeze on Commodity Trading Advisors and quantitative strategies shorting U.S. Treasuries. According to Kip Herriage, founder of Vertical Research Advisory, a squeeze of this scale would “send bond prices soaring and interest rates plummeting.”
However, prominent investor Stanley F. Druckenmiller has sharply criticized the Treasury’s intervention, warning that attempting to manipulate bond prices is a fundamental policy error. Commenting on the Treasury’s Aug. 19 announcement to double its long-dated bond buybacks from $2 billion to at least $4 billion per operation, Druckenmiller noted that while long-term yields briefly fell, they quickly reversed course within 24 hours.
“The market’s verdict was swift and correct: This wasn’t liquidity management, it was price management—and a mistake far larger than $4 billion suggests,” Druckenmiller wrote, arguing that official intervention is only justified during severe market dysfunctions like those seen in March 2020 or September 2022, not during normal price discovery driven by high inflation, a $40 trillion national debt, and persistent deficit spending. He cautioned that suppressing yields artificially acts as a “subsidy to procrastination” for lawmakers, masking the true financial pressure and eroding the long-term credibility of the U.S. Treasury market.
For bitcoin, the U.S. Treasury’s aggressive market interventions underscore its foundational investment thesis. As Washington leans on debt market operations, bitcoin’s role as a fixed-supply hedge against currency debasement becomes increasingly compelling, as evidenced by its latest price surge.
