Treasury Buyback and Fed Tightening Test Bitcoin's Resolve

The US Treasury's upcoming bond buyback operation could have a significant impact on Bitcoin's price as it tests $80,000. The buyback aims to ease pressure in the long end of the bond market and improve liquidity where demand is strong.

However, this comes at an awkward time for the Treasury, with long-term yields rising despite officials trying to improve trading conditions. To address this, the Treasury will double the maximum size of its liquidity-support operations for 10-to-20-year and 20-to-30-year securities from $2 billion to at least $4 billion per operation.

The jobs report released earlier had already pushed the Fed back into the driver's seat, with nonfarm payrolls increasing by 162,000 in August. This stronger-than-expected labour market data gave the Fed less reason to ease policy and instead increased the opportunity cost of holding an asset that doesn't generate income, such as Bitcoin.

Despite institutional demand remaining positive, with $730.8 million entering U.S. spot Bitcoin ETFs on September 3 and another $174.6 million on September 4, the current pullback is different from a simple risk-off move due to tighter financial conditions above and stronger institutional demand underneath.