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ELI5 the U.S. bond buyback announced recently and why did it make the price of Bitcoin skyrocket? (lemmy.world)
submitted 1 day ago by to c/explainlikeimfive@lemmy.world
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Sorry for the compound-sentence question.

The first part is in reference to this story which I've seen in a few different publications now.

Today, I happened to look up the price of Bitcoin (because it was relevant to a conversation I was having) and found it had shot up recently and was now at about $77,400 (up from the $63,000 when I last checked). Doing a little bit of searching, it seemed like the reason was the bond buyback.

(Sorry also for the sensationalistic hype article. I'm about as critical of blockchain snake oil as anyone can be. But I didn't find a better article about why it affected the price of Bitcoin.)

My questions are, in simple terms:

  • Is it roughly correct that buying a U.S. Treasury bond is loaning the U.S. money?
  • And that this story about bonds is basically saying that the U.S. government is "working on paying off its debts" (to bond holders)?
  • How is the interest rate on bonds decided?
  • What are bond "yields" exactly? (Is that just the same as the interest rate on bonds?)
  • Why are yields skyrocketing?
  • What reason does the treasury secretary give for buying back bonds?
  • Are there probable hidden ulterior motives for doing so? If so, what are they?
  • It seems like the idea to buy back bonds came from the White House, so this is probably a MAGA thing, yes? (Or is it more bipartisan than that?)
  • Who (if anyone) thinks the buyback is a bad idea and why?
  • Why are the blockchain bros so excited? What do they think this has to do with cryptocurrencies?

Thank you in advance, people! I like to think I know a fair amount about a fair amount, but finance (let alone fake blockchain Libertarian fairy tail finance) definitely isn't my strong suit, and I'm curious to know more about the dynamics at play here and where they're likely to lead.

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[–] 4 points 22 hours ago

Why are the blockchain bros so excited? What do they think this has to do with cryptocurrencies?

The funny thing is that things happening with cryptocurrencies themselves now have less apparent influence on their price than broader market events. Community sentiment also seems to be less relevant. This is probably because a larger share of the money is being moved around by institutional investors since ETFs are now a thing, and those people seem to be less interested in crypto itself and more interested in whatever their current idea is about its relationship with the rest of the market.

That said, narratives like this about why the price did what it did are themselves speculation, you can't really be sure that's the actual or main reason, it is a guess. What's closer to the real reason is just that a big chunk of money was spent on it by investors, whose reasons are their own and private:

US spot Bitcoin exchange-traded funds (ETFs) recorded $517.2 million in net inflows on Wednesday, their largest single-day investment since May 4, pushing August net inflows to $1.47 billion.

These prices often go up and down by large percentages like this for no apparent reason too, it's not impossible that this is a coincidence.

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