Unchained - Bits + Bips: How Bessent’s Treasury Buyback Is Fueling Bitcoin’s Rally

Episode Date: August 26, 2026

📢 Bits + Bips has its own channel now — full episodes here: https://www.youtube.com/@Bitsandbips  Bitcoin is pushing toward $80,000 after Scott Bessent's Treasury long-end buybacks flipped spot ETF flows positive and rattled the bond market. Austin Campbell, Ram Ahluwalia, and Chris Perkins are joined by Bitwise's Gordon Grant to unpack why rising Treasury volatility, and bizarre stress signals building in the TIPS market, are becoming a tailwind for Bitcoin's momentum trade. Hosts: Austin Campbell - Host of Bits + Bips, Founder of Zero Knowledge Group, and Adjunct Professor at NYU Stern Ram Ahluwalia - Co-host of Bits + Bips and CEO of Lumida Chris Perkins - Co-host of Bits + Bips and Head of Franklin Crypto Guest: Gordon Grant - Portfolio Manager and Head of Derivatives at Bitwise This clip is from a longer conversation on the CFTC's prediction-market brawl, parametric insurance, and a mystery AI model. Full episode here:https://youtu.be/tLKZl37uZ2g?si=Vp_6Y7PvXeDh_iJ8  We go live every Monday at 4:30pm ET — subscribe to catch it live. 👉 Visit 1inch to swap tokenized securities, crypto and more. Simple. Secure. Self-custodial. Whatever asset you’re buying - swap it at 1inch.com. Chapters 💰 00:20 Market snapshot: Bitcoin near $80K as ETF inflows flip positive 🌊 03:32 Gordon on how Bessent linked Treasury vol to Bitcoin's own vol spike 📈 05:32 Ram on the 'extraordinary' price action and Bitcoin's momentum 🎙️ 07:39 Chris on the Bitcoin/gold chart and the Fed-Treasury accord 🧮 09:30 Austin on the fiscal-dominance divergence between the front and long end 🔒 10:54 Gordon on the 'buyer strike' driving Treasury illiquidity 🔄 15:19 Chris on why the basis trade's return is bullish for crypto Learn more about your ad choices. Visit megaphone.fm/adchoices

You're listening to a brief segment from one of the Bits and Bips episodes this week. The full show is now only available on its own dedicated Bits and Bips channels. So be sure to go to X, YouTube, and your favorite podcast platform and search for Bits plus sign Bips, spelled BIPS, and subscribe. Let's start with some framing and then I want to talk markets, guys. So the tape last week turned pretty hard. Bitcoin topped 75K and kept running over. the weekend and into today. As we said, the ETF flows flipped. And the catalyst appears to have been the treasury. They started doing long-end buybacks, talking 30-year sector with maybe some in the 10-to-20

year. They were looking at $2 billion, up to $4 billion, maybe more as of today. And 30-year yields ran up. $4 billion is limited relief in a $32 trillion market. But there are some people who are saying, is positive. So Arthur Hayes, on Laura's unchained interview, said, I think this is the beginning of a major move on treasury buyback change. Warsh and Bessenter, quote, running the Powell and Yellen playbook, keep the short end cheap so the treasury can issue

short and buyback long, a sort of operation twist, quote, they are going to start printing money and the buyback is meant to scare the market into believing 5% on the long bond as the level will defend it at. ETH cleared 3,000 on that. But other analysts have stressed the buyback is not QE. The Fed did not turn on the printer and that the bond market moved first and it was a short squeeze that did the rest.

So I want to start before we get into some of the other commentary since we have a few people here and know a little bit about these markets. And Gordon, I'll go to you first. When you're looking at what Vescent is doing and what it's doing, doing to perceptions and volatility in the market. What are you seeing here? I feel like Bitcoin was kind of the last with large-cap liquid assets, X-Crypto, to pick up on the volatility bug that's been percolating, permeating, pervading the macro space for the last several months.

We had chips and GPUs and data center players and large-cap FinTech and then the energy markets earlier in the year and rates themselves. And I think what Bessent has done from my perspective, right, sitting here and trying to run a number of significantly sized Bitcoin and crypto volatility books is make a connection between tradfi rates volatility and now crypto volatility in a way that is meaningful to institutional participants and that a narrative can be gold around. And I think the market reaction is really saying not much more than that, which is to say, as you pointed out, Austin, volumes are not so significant from this perhaps redux of operation twist in the context of the size of the market, but signals can be as effective as sizes. I think we saw this a little bit with the way micro-strategy's own policy articulation played out earlier in the year. When signaling wasn't effective, it took some size to finally get things moving.

Here, it's a bit of the opposite. And the expectations around what it could mean, if there's a steep yield curve and exactly the type of behavior that you meant, people here, think, see, and project in terms of price and their participation burr, even if the liquidity is not yet hitting the system. And probably from a delta or second order perspective, it matters more because most folks who are watching might have started to sense palpably that the tide was going out on liquidity. And this matters, right, in some substantive way. Rom, I want to flip over to you as somebody who's been following markets for a while here. What are you making of the price action over the last week?

Well, it's extraordinary. There's a lot happening. Number one is after Besson had the intervention into the end market, that's that commodities are racing again. And if we go out the spy versus gold chart, for example, you know, commodities just outrunning. So that's called the debasement trade. And then you had Trump's comments around crypto, which has sparked an incredible short squeeze in Bitcoin. And you have the Treasury Secretary talking about hyperliquid. It's like we're in a parallel universe.

I mean, it's as strategic apparently as like Taiwan semiconductor. Still continuing to think like that is the asset of this cycle. It's got all sorts of interesting properties around it. We talked about this a few months ago, the circle. and Coinbase deal with them. You know, Bitcoin's a momentum asset. It does have momentum now. And unlike other assets, momentum assets just kind of tend to keep going.

So when they have momentum, you don't want to like fade that. It is at a very interesting juncture right now. And you really have to manage this like day to day is how I would look at it. you know, there seems to be a bit of waning momentum around there, but you don't have any, you don't have any red bars yet. So, you know, I think there's like a tactical view and then strategic view. I can't even think that hyperliquids like the better asset in the category. You know, Trump also has midterm elections coming up. He doesn't want investigations from the House. And who got him elected, Fair Shake Pack. So the timing around this intervention

plays to the political cycle as well. clarity act has been challenging. This is a way to deliver a win and potentially juice up those coffers to set up for the next midterm fight. So you guys see the

Go ahead first. Sorry. Yeah, I was going to say, do you guys see the Bitcoin gold chart? It's been pretty much vertical, which is really, I think it's a good story for Bitcoin. And just to unpack some of the stuff you guys said,

we've been talking on the show for a long time about the new Treasury Fed Accord, right? And I think you're going to see more of this in action this week as Worse ends up in Jackson Hole. Probably not going to say a ton because he told people he's not going to say a ton. But what are you seeing? You're seeing these two guys working in very close coordination. And what have we known since the beginning? It's that Bitcoin. It's that crypto. It's very, very responsive to liquidity. It's very, very responsive to rates. I think people are starting to see that worse, well, may say some things, maybe he'll be hawkish, but I know we just don't see him moving rates anytime soon. He was not

put in the seat if the president thought he was going to raise rates in any way, shape, or form. And you're seeing a lot of a lot of the yield curve, I guess, I don't want to say control, but action being a function of Besson. And, um, and, um, You know, is this the beginning of a new regime? Well, it's pretty clear to us that Besson himself is very focused on keeping rates and check. He talks often about the tenure. Maybe this time he went out a little further on the curve. This also plays very nicely into the stable coin story if we can get stable coins going,

because if we can move debt to the front end of the curve, short-term treasury bills, we can issue more stable coins. We can have people consume those stable coins. Yields will stay nice and tight. and that's good if you're running a government and you want to keep your interest rates in check. You don't want to pay all that interest. So I think that's generally positive. So I think an interesting dynamic that's emerging there, Chris, to piggyback on your comments is,

if we look at the setup, Epescent talking about buying back the long end and issuing at the short end, we still have above target inflation for the Federal Reserve, but we also have significant amount of outstanding current treasury debt, it puts us, if you really zoom out and think about government finances in the simplistic way possible, which is to say dollars in, dollars out, a very funny situation where I might say fiscal dominance, that is to say the spending of Congress and the outstanding debt load means raising rates also strangely shoots more money out of the fire hose. If you are quickly reinvesting all of this in short term debt, there's more money going from the government into the private.

sector. So one of the things that I've been keeping an eye on here, and Gordon, I actually want to flip this back over to you for your opinion, is the increasingly divergent behavior between the front end and the long end of the curve, right? Like we see this behavior in EM historically, where the government starts doing things and kind of regardless of what they do, people lose confidence and the long end just starts going up and up and up. We're seeing a little bit of that in the United States, and that also tends to forget VAL. So what are you making of this whole situation through that lens? Yeah. Bingo. In a classical economics course, you talk a lot about liquidity preference.

I liken this to excess variance causing a buyer strike. And that's really the problem here. There's actually nothing in common between 30-year rates and the front end, just as there's very little in common between one-month implied ball and one-year implied ball. Sometimes they're the same level and sometimes they're different by many factors. or even orders of magnitude depending on the asset class. That excess variance has now caused liquidity to worsen, right? It's not the same as it was when rates were a lot lower. I think it's also therefore caused a knock-on effect in disparities based on what I read. Again, I'm not in the treasury market all day every day like I was when I was at a macro shop

for a long time. But the on the run, off-the-run stuff appears to be rearing its head again. It's also showing up as it seems a little bit in some of the swap spreads. And all of that is kind of signs of bad cholesterol, as my former mentor in Boston, NWI used to call it. And I think, you know, an operation twist, a jawboning policy articulation out of the Fed might be, you know, kind of intended to bring down some of that LDL or at least change people's perceptions and say, is this really LDL or maybe, you know, there's something going on here. There's a little bit more HDL in that mix than you think and you shouldn't be as scared of it. Now, are they going to get, and this is going to open Pandora's box for our call, so forgive me if I'm doing that. But I think, are they ever going to be able to get the international community?

Not ever. Never is a long time. But in the near future, are they going to be able to convince the international community to get back into the long end in a big way? Right. What would it take to convince some of the most significant international participants in the Treasury market to say, hey, take that bet on U.S. policy orthodoxy, U.S. rhetoric consistency. you know, U.S. decision-making hierarchy in a way that would inspire, you know, people to come back into the long end in a big, big way. Not sure that's the case. But I think it's kind of a low, you know, it's like a low credit quality perception that we're going to have to deal with here. Of course, there is no credit quality because they can always pay back in their own currency. But I think, you know, the credit quality for them is the variance, right? And it is something. that you tend to see in sort of junk issuers and high yield where even at higher levels of yield, there's higher levels of yield and price variance. And that's kind of making the treasury market seasick.

And there are some markets that thrive on vol, right? Bitcoin people tend to like when the VAL picks up. When the VAL is low, it's not good for Bitcoin, right? That takes us to DeK 22, Jan 23, when front-in Bitcoin VAL is in the teens and 20s, when price at that time was in the teens and 20s, takes us to where we were until August 19th at about 9.30 in the morning, right, where Bitcoin is hanging around its bottom decile of price and bottom decile of all. High vol and Bitcoin gets people excited about it because it starts to inflate the right tail of distribution. And rates kind of works the other way. Rates are bounded at zero. They're unbounded to the top side. And so this kind of vol starts pricing in not just greater gyrations around some mean

reverting tendency, but the skewness of the distribution. You go, hey, the log normal adjusted probability of 30-year rates going back to four is now going to be more equivalent to like 30-year rates or let's say 20-year rates, 10 years forward, hitting 6, 7, 8. And that starts to scare people. So you've got that skew moving the wrong way and you've got that crotic premium in the tails of the distribution move in the wrong way. And it's interesting to see how that's being detrimental for Treasury market stability, but it's actually creating momentum behind Bitcoin.

And for those of you that play in longer dated volatility in Bitcoin, you know, we've been of the view for a little bit of time that the long end was just inappropriately priced where you had stuff like one year, almost, sub 10 Delta strikes at, you know, take your pick, you know, 42, 43 vol. And that started to move the other way. So at the money, vol is now higher.

And the out of the money options, vaults higher, and that's exactly what's happening in treasuries just in the opposite way. Hey Gordon, the other thing I would add is in our space, the crypto space, when that volatility results in basis where you have the future prices higher than the spot price, all the big boys want to come in because when that gets attractive, crypto has been proven to be a very lucrative place to play the basis trade. Basis trade is very, very good for spot assets because what you do is you buy the spot, you sell the future. When you have more buyers and sellers, what happens? Price goes up. So that's another thing to really watch is watch basis, and that is very,

very healthy for our markets. And it's been a long time coming, right, for us to get back. It's been a long time. It's been awful, right? And there's no basis trade, like, no reason to buy a spot, sell future. And like, this was, this was a big trade during the last cycle. And I think it was one of the things that drove assets pretty high. So to pile in here on what's, going on in treasury markets. There's a weird little corner pocket of the treasury market. Most people don't think about too often called Tips, which is the inflation protected treasury market. We're starting to see some weird and chunky things moving around in the tips market, which is also usually a good sign something is like getting creaky in there. Right. Like you're seeing

very bizarre stuff like a one year, two year, three year butterfly action, which means the twos are much shallower than the ones in threes. You're seeing like bizarre steepiners, real yield has been hitting some highs since the crisis. Like all of these are basically signs to me that people are starting to think the end game of some of the U.S. fiscal imbalances may be closer than people think. Because if you look at the timing framework, we're probably now five to sixish years off to having to do something about Social Security, right? Like either just straight up cut benefits or start modified. programs or change behavior or just straight up print money. And when you're already going into that with a debt to GDP of 100 plus, you typically end up in one of two places historically.

One of those is inflation, where what happens is they'll hold rates down below what essentially real inflation is to work your way out of this over a, you know, however long period, call it a decade or two. And for those who think that haven't happened before in the United States, look at the post-war aftermath in the 40s, 50s, and then look at the 70s. Like, we've done this repeatedly. The other one is default. But again, the U.S. is denominated in dollars, controls all its debt in dollars. The dollar is used globally.

Here, I think inflation is the much easier political choice. So I don't really see people going with default in this case. And that leads, I think, Rom, all the way back to you, which is to say, you're talking about Bitcoin is a momentum trade here. And by the way, I do agree there's definitely momentum in crypto markets because while the fundamentals have definitely improved for something like Bitcoin here, it's hard to look at like Cardano rallying and sympathy a significant amount and be like, Cardano has tens of users. I'm not seeing people piling in and like more builders there. This is just a momentum trade. And so there's going to be some breaks and mean your version within the

category. But where I wanted to get to is, is this. momentum or put differently when everything is rallying like this, is it just inflation? If you like this segment, please like, subscribe, and tune in every Monday at 4.30 p.m. Eastern Time. I'm Austin Campbell, the host of Bips and Bips, along with my friends Rahm Alawalia and Chris Perkins and our slate of exceptional guests. Every week, we're going to discuss macro, crypto, and the collision of worlds covering topics that move markets and shape the financial landscape. $140 million. That's how much concentrated liquidity sat idle in a given week in the first half of this year. About 30% of the Defi TVL, if you're wondering. That's according to Dune Research commissioned by

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