Bitcoin Rises as an Alternative to a Weak Dollar
BTC (Bitcoin) has shown its steepest rise in over three years, buoyed by financial instability in the U.S. and a weakening dollar.
On the 27th (Korean time), Bitcoin traded at $79,000 (approximately 1.093 million USD) on the cryptocurrency information site CoinGecko, marking an increase of about 23% over the past week. This is the largest weekly increase since March 2023, approximately three years and five months ago.
Debasement Trade
The key background for this rise is the so-called "debasement trade" in response to the decline in currency value. This debasement trade emerged after concerns grew that trust in the dollar could be shaken as the U.S. Treasury intensified market interventions to suppress interest rate hikes amid expanding fiscal deficits and national debt. Bitcoin, which cannot be arbitrarily supplied by the government, has been highlighted as an alternative asset to avoid the decline in dollar value, alongside gold.
This trend of a weak dollar began after the Treasury's directive to purchase yen on the 1st. On that day, the Treasury intervened in the foreign exchange market jointly with Japan by selling euros and buying yen through the New York Federal Reserve. The apparent goal was to stabilize the yen, which had fallen to its lowest level in 40 years. However, experts believe that the primary motive was to defend U.S. Treasury yields. Japan is the largest foreign holder of U.S. Treasuries, and if the yen's value plummets, the Japanese government may sell its U.S. Treasuries to secure dollars needed for currency defense. Experts suggest that the U.S. intervened to suppress Treasury yields before such an event could occur.
The Treasury's market interventions did not stop there. On the 19th, the Treasury announced it would more than double the size of its long-term Treasury buyback program. The purchase limits for 10-20 year and 20-30 year Treasuries were increased from $2 billion (approximately 27.68 trillion KRW) to at least $4 billion (approximately 55.36 trillion KRW), effective from September 9 to November 4. On that day, the yield on 30-year Treasuries fell from around 5.34% to 5.18%, but the rates quickly surged again, leading to growing concerns about a U.S. debt crisis, which began to draw attention to Bitcoin and gold.
Ray Dalio, founder of Bridgewater Associates, warned on the 22nd that "if the current policy stance does not change, a U.S. debt crisis is expected to occur in about three years, and considering the margin of error, a crisis could manifest within 1 to 5 years." He advised reducing bond holdings and diversifying portfolios, recommending allocating 10-15% of portfolios to gold and holding a small amount of Bitcoin.
Variables: Buyback and Clarity
Market attention is now focused on Bitcoin price forecasts. The biggest variable that will determine Bitcoin's price in the future is the Treasury buyback starting on September 9. Experts believe that if the Treasury buyback leads to lower Treasury yields and a sustained weak dollar, Bitcoin is likely to continue rising in price after September. This is because the easing of financial conditions could revive risk asset preferences while also coinciding with demand for debasement trades to avoid a decline in dollar value. Conversely, if the buyback lowers Treasury yields but restores confidence in U.S. fiscal policy, leading to a strong dollar trend, the enthusiasm for debasement trades that has driven recent Bitcoin gains may somewhat diminish.
We also need to consider scenarios where Treasury yields rise again despite the buyback. If the rise in Treasury yields is due to fiscal instability and a decline in Treasury trust, it could be negative for the stock market, but Bitcoin may show strength as an alternative store of value alongside gold. On the other hand, if inflationary pressures resurge or concerns about the Federal Reserve's tightening lead to rising Treasury yields and a strong dollar trend, Bitcoin could experience significant declines.
Digital asset policy variables could also impact Bitcoin prices. The U.S. Senate will hold a vote to end debate on the Digital Asset Comprehensive Act (CLARITY Act) on September 15. If this vote passes and the bill is signed by the president after passing both houses, uncertainties surrounding the classification of digital assets as securities or commodities and regulatory jurisdiction could be resolved, leading to a significant increase in institutional demand for digital assets. In particular, the interest and reward systems for stablecoins, which are gaining attention as a new source of demand for U.S. short-term Treasuries, will be addressed in the CLARITY Act, making it a key to resolving current U.S. fiscal issues. For example, Tether, the issuer of the world's largest stablecoin USDT, currently holds about 61% of its stablecoin reserves in U.S. short-term Treasuries. If the bill passes, the demand from new users seeking to earn interest and rewards from stablecoins could intensify the pressure to buy U.S. short-term Treasuries. However, if the bill fails to pass, market expectations could dissipate, leading to a decline in Bitcoin prices.
Breaking the $100,000 Barrier
Technically, experts believe that Bitcoin must surpass $100,000 (approximately 1.38 million USD) for investment demand to increase and the upward trend to continue. The most common realized price range for Bitcoin, according to on-chain data analysis platform Glassnode on the 27th, is between $80,000 (approximately 1.104 million USD) and $90,000 (approximately 1.242 million USD). The realized price is an indicator that calculates the price at which Bitcoin last moved on-chain, used to estimate the average purchase price for investors. This suggests that many investors bought Bitcoin between $80,000 and $90,000 during the digital asset bull market in 2025.
Global asset management firm Bernstein stated in a report on the 27th that "the U.S. national debt has reached $40 trillion (approximately 55.248 quadrillion KRW), and high interest rates are expanding interest burdens and fiscal deficits, leading the government to potentially choose currency devaluation over fiscal tightening." They explained that if the currency devaluation continues and a weak dollar is maintained, Bitcoin, with a fixed supply, could become an alternative. They also added that if this trend continues and institutional inflows occur rapidly, Bitcoin could rise to $500,000 (approximately 6.9025 million USD) by 2029.
-- Price
This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.
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