Bitcoin continued its rally on Friday (+7%) putting the token on track for its best weekly gain (+22%) in more than three years. The surge started earlier this week after U.S. Treasury Secretary Scott Bessent announced the U.S. government would double the size of its purchase of longer-dated Treasuries from $2 billion to at least $4 billion. While minuscule compared to typical Fed-led QE programs which normally amount to multi-trillion-dollar buy programs, the Treasury action represents an important signal that the Administration is intent on coordinating policy to stop the rise in long dated treasury yields which remain near their highest levels since 2007.

I would fade the bitcoin rally since this is not QE and the Treasury intervention ($2 billion) is tiny compared to Fed-driven QE buy programs where the Fed literally prints money to buy treasuries. This isn’t that. Some argue Trump/Bessent will convince Fed chair Warsh to join in their campaign to reduce long-term rates but as in Trump’s battle to get Warsh to cut short-term rates, there is no crisis that warrants new QE (e.g. the last QE program by the Fed was Covid in 2020, which totaled $4-5 trillion). Warsh would lose huge credibility in their efforts to reduce inflation to 2% if the Fed were seen as following Trump’s directive in trying to bring down long-term rates.