Bitcoin and gold rallied sharply this week, with both assets drawing support from turbulent developments in the bond market—and the cryptocurrency receiving an additional push from policy activity in Washington.

The moves mark a stark reversal for bitcoin, which had fallen from a January high of around $95,000 to below $60,000 by the end of June. Earlier in the year, investors steered clear of speculative assets, and crypto supporters voiced concern about the lack of progress on proposed regulation of the industry. On Friday, bitcoin rose above $77,000.

Gold followed a similar arc, reaching a high above $5,300 in January before dropping to around $4,000 in June as rising rates made interest-bearing investments more attractive. On Friday, gold rose to $4,661.

The first jolt arrived Wednesday, when the Treasury Department announced plans to significantly increase its buybacks of long-term Treasurys, or government debt—a tool the department revived in 2024, after a pause of more than two decades, to keep trading liquid in older bonds. On the same day, President Donald Trump—who made about $1.2 billion last year from various crypto holdings—urged Congress to move quickly on crypto legislation.

The reaction was almost immediate: a sell-off in the dollar and a jump in the value of gold and bitcoin as investors rotated toward alternative assets.

A Doubled Buyback and Its Side Effects

In a surprise announcement Wednesday, the Treasury said it would at least double the size of its planned purchases of longer-term government debt. Buybacks are funded largely by issuing additional short-term bills, and the added demand for long-dated securities tends to pull long-term yields down—which is why the program is watched as a direct lever on the government's borrowing costs. The maneuver was intended to calm bond markets after a sustained sell-off in which investors demanded higher yields to lend money to the United States, a country they had suddenly come to view as riskier.

While the intervention worked, at least for a short period, it also raised questions about whether the government is trying to push borrowing costs lower despite inflationary pressures. Treasury Secretary Scott Bessent is attempting to lower long-term borrowing costs—a move that can put upward pressure on inflation at a time when inflation is already elevated. Bessent's maneuver could handcuff the Federal Reserve, which fights inflation by raising interest rates.

Then there is the national debt, which surpassed a record $40 trillion on the same day the Treasury's actions unfolded. The milestone came just five months after U.S. debt hit a record $39 trillion in March, and five months before that, in October, it reached $38 trillion. The interest bill on that debt has grown into one of the federal government's largest single expenses—annual interest costs have topped $1 trillion and now exceed the defense budget—making long-term yields a first-order fiscal issue in Washington, not just a market variable.

Anxiety over inflation is already elevated, driven particularly by the conflict in Iran and soaring energy prices. When yields on U.S. bonds are not truly reflecting risk, that often shows up in the value of the U.S. currency—and the dollar took a significant downward swoon Wednesday. The size of future buybacks is typically laid out in the Treasury's quarterly refunding announcements, which serve as a recurring checkpoint for how far the department intends to take the program.

The Debasement Trade

So where does the money that was invested in the dollar or Treasurys go? This week, it appears to have been funneled into what is known as the "debasement trade," in which investors flood into alternative assets such as gold, which rose more than 2% Wednesday. The phrase gained wide currency in 2020, when billionaire investor Paul Tudor Jones said he was buying bitcoin, gold and commodities as a hedge against central-bank money printing. The debasement trade now includes bitcoin, whose supply is hard-capped at 21 million coins by its underlying code—a fixed-supply design at the heart of its "digital gold" pitch—and which jumped more than 20% this week.

Washington added to the momentum. On Wednesday, Trump—who banked nearly $1.2 billion from his crypto businesses last year—held a cryptocurrency conference at the White House, where he called on Congress to pass the crypto-friendly Clarity Act, saying it would "keep us ahead of China, keep us ahead of everyone else." The bill, which cleared the House in 2025, would divide oversight of digital assets between the Securities and Exchange Commission and the CFTC, drawing a clearer line between tokens treated as securities and those treated as commodities.

Trump then yielded the floor to Commodity Futures Trading Commission Chair Mike Selig, who vowed to "use every tool available" to advance Trump's agenda. The CFTC, which polices futures and derivatives markets, has long jockeyed with the SEC over crypto jurisdiction. Selig's comments came ahead of a CFTC meeting Thursday examining ways the agency can use its existing authority to ease crypto rules. A day earlier, other regulators had proposed rules making it easier for crypto companies and projects to raise money from the public.

Since taking office, Trump has pushed policies friendly to the crypto industry and reversed a Biden administration regulatory crackdown.

Shorts Squeezed

Bitcoin can sometimes get a bump when the U.S. dollar is on the ropes, as investors seek to unload the U.S. currency. But the related movement observed this week is atypical.

The price of bitcoin had been stuck between $62,000 and $67,000 for weeks. Investors seized on that weakness, with many placing bets that the cryptocurrency would remain in that range for some time to come. Instead, on the day the Treasury announced its buybacks, Treasury yields fell, the dollar slid, and bitcoin blasted through the upper level of $67,000.

The Treasury's actions reduced the returns investors could earn on U.S. bonds and the dollar while boosting the value of bitcoin. As a result, many investors who had shorted bitcoin—or bet that its price would remain subdued—were forced to close their positions as the cryptocurrency surged. Closing those bearish positions required buying back the digital asset, adding even more upward pressure on bitcoin's price.

By Friday, more than $4 billion in bearish crypto positions had been liquidated during the rally, according to CoinGlass, which tracks cryptocurrency derivatives markets. Liquidations occur when exchanges forcibly close leveraged positions that no longer meet margin requirements, and because such bets are placed with borrowed money, the forced buying can arrive all at once. And because bitcoin was already rising, those forced purchases added fuel to the rally, potentially triggering still more liquidations as prices climbed.

This story was originally featured on Fortune.com.