Treasury Buybacks Revive ‘Debasement Trade,’ Boosting Appeal of Bitcoin, Ether and Zcash

Forecast Trend Report by Period

Rising US government debt and an expansion of long-dated Treasury buybacks could undermine confidence in fiat currencies, potentially benefiting digital assets including Bitcoin, Ether and Zcash, Grayscale said.

In a report published on Aug. 26, Grayscale Research Head Zach Pandl said the US Treasury’s expanded purchases of long-dated bonds may help relieve upward pressure on Treasury yields. But the move does not solve the underlying problem of structural fiscal deficits. “The Treasury is treating the symptom of rising bond yields without curing the disease of structural fiscal deficits,” he wrote.

The Treasury recently announced a larger long-dated bond buyback program. Under the plan, it would buy longer-maturity Treasuries in the market and retire them, reducing supply pressure after accounting for risk and duration. Grayscale said the measure could have a modest stimulative effect.