Has Bitcoin reached its end?

NDV Research Observation ｜ Jason

This article discusses macroeconomic mechanisms and public information, does not involve any fund products, and does not constitute investment advice or profit commitments.

In the last issue when discussing Bitcoin, I included a statement: What Bitcoin lacks now is not a reason to stop falling, but a catalyst for upward movement. What is that catalyst? I said I don't know; I don't have a crystal ball.

Less than two weeks later, the market provided the answer. And it came from a direction that almost no one had bet on.

On August 19, Eastern Time, Bitcoin rose 8.7% in one day, reaching a peak of around $69,700 during the day, touching the $70,000 mark for the first time since June. On the same day, about a billion dollars' worth of shorts were forcibly closed—some statistics say it reached $1.4 billion. Shorts are those who borrowed coins to sell, betting on a price drop: as the price rises, they must buy back the coins to return them, causing the price to rise further, leading to more buying. This kind of squeeze is colloquially known as a short squeeze. The $1.4 billion short squeeze was the most brutal single-day slaughter of shorts in the digital asset market in recent months.

So the question arises: Who lit the fire?

It wasn't the Federal Reserve. It was the U.S. Treasury.

1. The Treasury Took Action

On August 19, Treasury Secretary Bessent announced: the scale of repurchases of long-term U.S. Treasury bonds would be doubled. Previously, the Treasury could buy back a maximum of $2 billion of 10 to 30-year old bonds from the market at a time; now it has changed to at least $4 billion each time, and the number of operations per quarter has increased from two to four, starting on September 9.

Why? Because before this, the yield on 30-year U.S. Treasury bonds surged to the highest level since 2007—the cost for the U.S. government to borrow money reached its highest point in 19 years. The background is well known: on one hand, there are concerns about the escalation of the U.S.-Iran conflict, and on the other, there is market distrust regarding the increasing borrowing by the U.S. Treasury. The Treasury couldn't sit still and decided to take action by buying back its own old long-term bonds.

Where does the money for the Treasury's bond purchases come from? It doesn't have a money printing machine; that is in the hands of the Federal Reserve. Its method is: issue new short-term Treasury bonds to borrow money, and then use that money to buy back its long-term bonds—borrowing short-term while buying long-term.

Doesn't that sound a lot like quantitative easing (QE, a central bank operation of printing money to buy bonds and suppress interest rates)? Wall Street was in an uproar that day, with three different opinions:

The first camp said it doesn't count. Analysts at TD Securities stated directly: the Treasury cannot print money; the money for buying long-term bonds comes from issuing short-term bonds, which is equivalent to swapping long-term debt for short-term debt, moving money from one pocket to another, at most counting as the Treasury's version of the Federal Reserve's "Operation Twist" in 2011.

The second camp disagreed, with some media coining a term: QE Lite, a lightweight version of quantitative easing. The logic is: regardless of whether the money is printed or borrowed, the key is the effect—moving forward, there is now a buyer for long-term U.S. Treasuries who does not care about price or value. This is functionally the same as QE; the only difference is that it preserves the appearance of the Federal Reserve's independence.

The third voice was more critical: some established financial blogs claimed this is just a trick, issuing bonds and buying bonds in a circle back to the starting point, with the only real effect being to verbally manage the bond market—telling all the short sellers of long bonds that the Treasury is watching them.

The same action, three interpretations. But what matters is not which interpretation is more theoretically correct, but which one the market believes—and the market had already voted with prices that day: once the announcement was made, long bond yields fell, the dollar weakened, gold rose, and Bitcoin surged. Yields down, dollar weak, risk assets up—this entire sequence of actions is the market saying with real money: we believe this is easing.

My view: I stand with the camp that sees this as functionally equivalent to QE.

2. A Layer More Important than Price Movements

There is a deeper meaning to this matter.

Regular listeners will remember that we discussed how the current Federal Reserve Chairman Warsh took office with a political mission. This action indicates that even the Treasury is no longer waiting for the Federal Reserve. The task of suppressing interest rates, which is supposed to be the central bank's job, is now being taken on by the Treasury itself. The boundaries between those managing the money supply and those controlling the printing press are becoming blurred—this phenomenon has a technical name: fiscal dominance: the government's borrowing needs are so great that monetary policy must cooperate with fiscal policy.

Looking at the bigger picture: a government with borrowing costs at a 19-year high does not choose to borrow less or spend less; instead, it takes action to push down interest rates to continue borrowing. This is not a commitment to fiscal discipline; it is a farewell to fiscal discipline. This is not a new phenomenon in history: after World War II, the U.S. did something similar, keeping interest rates low for a long time to allow inflation to gradually dilute debt, known in textbooks as financial repression—put simply, making savers pay for borrowers. Every time this step is taken, the main characters in the story are the same group of assets: those that cannot be printed.

This is not abstract for ordinary people: it relates to where mortgage rates are headed, how much your dollars are worth, and whether the long-term narratives around assets like gold and Bitcoin still hold.

3. A Splash of Cold Water First

An 8.7% rise in one day—how much of that is from real buyers? To be honest, a significant portion is not; it comes from short sellers being forced to buy back. The rise driven by a short squeeze is like fireworks: bright but not sustainable. Therefore, August 19 itself does not prove a bottom.

There is an old market rule: the longer an asset has been falling, the more intense the short squeeze. The longer it falls, the thicker the short positions betting on further declines become, like dry tinder that ignites with a spark. Thus, the first wave of increases at the tail end of a bear market is often particularly frightening and irrational—not driven by new buyers going wild, but by old shorts fleeing for their lives. Judging the nature of the market based solely on a single day's rise is never sufficient; one must see if there are real buyers to add fuel after the fire burns out.

What truly deserves attention is another factor: trading volume.

Since August, the trading volume in the Bitcoin spot market (by volume) has dropped to its lowest level since 2019—a seven-year low. In the last issue, I mentioned that this time Bitcoin returned to a low position with almost no discussion; this silence itself is information. Now, this silence has numerical evidence.

Translating the trading volume's low point into plain language: those who wanted to sell have basically sold out, while those who want to buy have not yet entered the market, leading to a state where no one wants to move. Throughout history, every major bottom has looked like this—lively tops, quiet bottoms, always the same.

The sentiment picture is the same. The last time Bitcoin was at this price level, the screens were filled with "it's over" and "liquidated"; this time, returning to a similar position, even discussions about "is Bitcoin dead?" are not being initiated. Various bearish narratives—it's worthless, quantum computing is coming—have been recycled with different labels; I've heard them for eight years; this time, even the storytellers have decreased.

There is another half of the information regarding "the lowest since 2019": the last time the spot market was this quiet was in 2019—before the last major market rally started, when no one paid attention to Bitcoin. I'm not saying history will definitely repeat itself; there are only a few samples; but at least, trading volume lows never occur at tops; they only appear in places where no one wants to buy. This historical fact has never been broken.

4. Smart People Are Divided

The bearish camp is currently the mainstream in institutional research. VanEck (a U.S. asset management company managing hundreds of billions) reported on August 19: 8 out of 12 surrender signals are lit, but clearly stated this is a bottoming process, not a confirmed bottom. On-chain data company Glassnode: 45 indicators are in a surrender state, with the duration being the longest since the FTX collapse in 2022, and long-term holders sold 356,000 coins in the past 30 days. Digital asset investment bank Galaxy predicts a bottom in the fourth quarter, with a range of $40,000 to $46,000, and a panic scenario seeing $28,000. There are also seasonal analysts: Bitcoin has fallen every August for the past four years, betting this year will be no different, targeting $58,000 to $62,000; another group of well-known cycle analysts is betting on a bottom in September to October. This camp also has a solid card: while the spot market lacks volume, the open interest in futures is rising, indicating that recent volatility is mainly driven by leveraged short-term traders; the inflow of funds into the U.S. Bitcoin spot ETF (a channel for ordinary people to buy Bitcoin through brokers) is also slowing down—real long-term buyers have not yet entered the market on a large scale.

The bullish camp's voices have noticeably increased after August 19, with one logic: the logic of liquidity has just been validated—the Treasury suppresses yields, the dollar weakens, and risk assets benefit, while Bitcoin has always been the asset most sensitive to liquidity. The catalyst has arrived.

On one side, they say surrender signals have not fully lit up, and there is one last drop to come; on the other side, they say a turning point has occurred, and those waiting for a pullback will continue to wait. Both sides have valid points. This is the most authentic state of the market at this moment: in front of the same set of data, smart people are divided.

By the way, here's a method: when faced with two opposing camps, don't rush to take sides; instead, ask the reverse—what will each side see first if they are wrong? If the bears are wrong, you will see prices not reaching the low point they are waiting for; if the bulls are wrong, you will see this rise lacking volume and slowly retracting. Write down the conditions for both sides to be wrong and let the market reveal itself in the coming weeks. Judgments are judgments, facts are facts, and let the facts be the referee. Moreover, both sides are watching the same date: September 9, when the doubled repurchase officially begins—starting from that day, "a buyer stands below the long end" will transform from an announcement into an operation that happens every few days.

5. "Is it over?" is the Wrong Question

In the last issue, I made an analogy: gold and Bitcoin are in the same team, waiting for the same examiner; gold has already finished the exam, while Bitcoin is still waiting outside the examination room. Now we can continue the analogy: on August 19, the examiner called Bitcoin in, and the Treasury's action is the exam paper handed to it. The exam has begun—this is a completely different stage from waiting outside the door.

So, is Bitcoin over? This is probably the question I've been asked the most in the past two weeks.

My approach is to break it down into three smaller, answerable questions: First, has the selling pressure cleared—have those who sold 356,000 coins finished selling? Second, is this catalyst a real ignition, or just a false move of a short squeeze? Third, are there any more landmines in this market?

Why these three questions? Because historically, every major bottom has been reached when three conditions are met: no one wants to sell anymore, there is a new reason to buy, and there are no unexpected events to scare everyone away again. Missing any one of these means the bottom does not hold. This checklist is not a temporary invention for this issue; it is an old tool I have used in every cycle.

I have my own answers to these three questions. Moreover, my answers differ from the mainstream script of institutions—regular listeners know that my habit is always to stand on the less crowded side, and this time is no exception. The complete reasoning process, the answers to each question, and my final judgment on Bitcoin's current position are all included in this issue's paid section. The paid section is recorded by me with my phone, casually chatting, without a script—discussing mechanisms can be precise, but when it comes to disclosure, the more polished it is, the more fake it feels. The price is just the cost of a cup of coffee; consider it a treat for me, a way to make a friend.

Finally, whether you listen to the paid section or not, I offer you an observation tool: keep an eye on the combination of trading volume and price. A declining volume with a downward trend means no one is buying, so there's no need to panic; a drop below previous lows with huge trading volume indicates someone is selling without regard for cost—completely different signals. The same candlestick, with or without volume, represents two worlds. This tool is not only applicable to Bitcoin but also to stocks, gold, and anything with publicly available trading volume.

Forward this article to that friend who always asks you, "Is Bitcoin dead?"—they've been waiting for this topic for a long time.

Disclaimer: This article is a compilation of research viewpoints aimed at helping readers quickly understand related content. This article is for reference only and does not constitute any investment advice, nor does it constitute an offer to sell any securities or an invitation to subscribe.