Bitcoin’s faces a weird new macro reality as the Fed turns off the tap and Treasury opens the floodgates

Bitcoin's current rally started when the Treasury Department announced on Aug. 19 that, beginning Sept. 9, it would at least double the maximum size of certain buyback operations for government bonds with 10 to 30 years left to maturity, raising the cap from $2 billion to $4 billion per operation.

Simply put, the Treasury was offering to buy more older long-term bonds from dealers that wanted to sell them.

Later that day, the Federal Reserve released minutes from its July meeting, where three members had voted for a quarter-point rate increase, and many others thought another hike would be needed if inflation failed to retreat.

The central bank kept its target range at 3.50% to 3.75%, though the debate had already moved from how long rates should stay high to whether they should go higher.

At first, Washington seemed to be pushing bond markets in two directions. The Fed was trying to make money more expensive across the economy, while Treasury debt managers were trying to make older long-term government bonds easier to trade.

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