A 23 Percent Rally Built On Four Billion Dollars: The Bottom Is In, The Breakout Is Not

Russell Thompson on Bessent’s weak Operation Twist, the fiscal end game, Warsh at Jackson Hole and a volatility smile that has flipped to the call side

Bitcoin has rallied 23 percent from the 63,000 area to above 77,000, but the case for the move does not hold up under inspection. Bessent announced buybacks of 4 billion dollars in the long end, described by the market as a weak Operation Twist. Thirty year yields fell six basis points and have given it all back. Ten Year Treasuries dropped ten basis points and are back at 4.71. Two year yields are actually higher. The curve is three basis points steeper than a week ago and rates are exactly where they were. Russell’s view is that the bottom in Bitcoin is now confirmed and the technical picture is strong, but that without a catalyst this particular rally risks being built on sand. Jackson Hole opens Thursday with Warsh delivering the keynote on Friday, and the inflation measurement question is where the policy content is likely to sit.

Bessent’s Buyback: A Drop In The Ocean

On Wednesday Scott Bessent announced what the market has been calling a weak version of Operation Twist: buybacks of 4 billion dollars in the long end, specifically the 30 year. Russell’s assessment is that this is an absolute drop in the ocean, and that the 30 year part of the curve is somewhat redundant t hese days. Twenty years ago the long bond was the benchmark everyone tracked, but by far the more important part of the US curve now is the ten year and the shape between two’s and ten’s,s, which determines bank profitability, bank funding, and has more impact on mortgage rates than the very long end does. The price action confirms it. Thirty years went from around 5.24 percent, dropped roughly six basis points to 5.18, and the market has since eaten that back entirely. Tens were at 4.74 percent, dropping ten basis points on the news, and have been sold back to around 4.71 as of this call, giving up nearly all the benefit. Two year yields are actually higher, which is not good, and points to the Operation Twist element: a replacement of debt out of the 30 year into more of the front end. Two’s went from 4.16 percent before the announcement to 4.20 immediately after and now sit at 4.23. Tenor Before On the news Now 30 year 5.24% 5.18% Back to 5.24% -10bp 10 year 4.74% ~4.71% 2 year 4.16% 4.20% 4.23% Source: Hilbert Trader’s Call 24 August 2026 Where the action is: What happens to the long end of the Treasury curve is what determines where risk assets go over the next six months. The question is whether the steepening continues, and whether it comes as bear steepening or bull steepening. The 4 billion dollar buyback does not answer it, but it does not preclude the Treasury going much bigger later. This is not yield curve control.

The Fiscal End Game: Japan Is The Template

Russell does not regard the big picture as much of a mystery. The United States is going to see what Japan is seeing. The Japanese have enormous fiscal expansion coming through, over two trillion dollars entering the economy, and the result is severe pressure on the yen alongside rising JGB yields. The same dynamic is heading for the US, the dollar is in trouble, and the open question is what the Treasury does to try to cap yields. Bessent gave an interview on Friday outlining the tools available, and the market did not like it. The Treasury does have significant tools at its disposal, so the small scale of the current action does not preclude a much larger intervention and genuine yield curve control later. The underlying problem is political. There is no serious discussion inside either party about fiscal control, and the market is beginning to pay attention. Russell described this as an end game, one that could be a month away or a year away and may take weeks to materialise, but the market will not accept yields at these levels alongside a US current account deficit that keeps getting bigger. Nothing will be discussed before the midterms because it is a vote killer. His expectation is that the fiscal deficit people have been talking about for years is about to start generating headlines and movements in the real asset market. Flagged as a heads up: The combination of a widening current account deficit, no fiscal discussion in either party, and no prospect of one before November is what makes this an end game rather than a cycle. The trigger and the timing are unknown; the direction is not.

Crypto Policy: The White House Meeting And CLARITY At 25 Percent

Trump met a number of prominent crypto executives at the White House. One positive development was an attempt to move Hyperliquid onshore in the US, and efforts to that end are underway. Trump and the crypto executives also talked up CLARITY passage, with the vote still scheduled for next month. Odds of passage have improved from around 21 percent to 25 percent. Russell’s read is that jawboning aside, there has been no material concession from either side. The blocking issue remains governance. The SEC element is a red herring: the SEC has opened a 60 day comment period, so people can submit comments over that window, but the SEC itself has said it needs federal legislation alongside whatever it does. Something has to get done on CLARITY, and nothing material has changed between today and a week ago.

Does Any Of This Justify 23 Percent?

Setting the pieces side by side: the US yield curve is three basis points steeper than a week ago and rates are exactly where they were. CLARITY odds have moved four points and no concession has been made. Against that, Bitcoin has rallied 23 percent from the 63,000 area to above 77,000. Russell’s answer is that of course it does not justify the move, and he was explicit about pouring cold water on the breakout camp. That is a separate question from whether the low is in. Other factors have been at work on the technical and liquidation side, and the call that the bottom is in, which the desk has been making for several weeks, is now justified in his view. But moving materially higher from 77,000 toward 100,000 into year end requires a catalyst, and he does not see one from here. The rally may be built to a certain extent on sand, and the test comes with Jackson Hole later this week. Russell Thompson, CIO "I do believe that the bottom is in in Bitcoin. But are we going to move materially up from 77,000 to have a look at 100,000 into the end of the year? Without a catalyst from here, I just don’t think so."

Data: Minutes Read Dovish, Warsh Takes Heat

Last week’s data was mixed. Industrial production missed. Manufacturing PMI came in cold at 53.2 against 53.9 expected, while global services PMI came in considerably hotter at 56.8 against 54. The FOMC minutes held no real surprises and contained something for everyone, but Russell read them as somewhat more dovish than Warsh’s statement after the meeting. Warsh has taken a fair amount of heat for that statement. He was eloquent, far more so than Powell ever was, and definitive that the Fed will tame inflation no matter what. The market’s response has been to ask why, with a 2 percent target and mandate, the Fed is holding. The minutes have not helped him: having presented himself as an inflation tamer, he has a divided committee sitting behind him.Russell maintains the position that this Fed will not deliver rate hikes and that hiking would be crazy, although he notes that some of the inflation data is beginning worsen, which he attributes largely to what has been happening in the Treasury market. Indicator Actual Expected Verdict Industrial production Miss · Cold Manufacturing PMI 53.2 53.9 Cold Global services PMI 56.8 54.0 Considerably hot Read dovish vs Warsh FOMC minutes Something for everyone · Source: Hilbert Trader’s Call 24 August 2026

This Week: Core PCE, Housing And Jackson Hole

Core PCE on Wednesday is the number above all others that the Fed looks to for its read on inflation. Month on month is expected at 0.2 percent and year on year at 3.3 percent, and it will be closely watched. The week also brings a better look at US housing, with new home sales on Tuesday and mortgage applications on Wednesday. Mortgage rates are going through the roof, and a cratering housing market is not something the Fed wants to see. This is one of many competing priorities the committee is having to weigh. Friday brings the University of Michigan numbers, with consumer expectations expected at 50.6 and sentiment at 51, slightly expansionary. The inflation expectations series is the one that matters most, because it is forward looking and the Fed watches it very closely. One year expectations sit at 4.3 percent and five year at 3.3 percent, which Russell describes as not exactly scary for this Fed. With labour markets ticking over and housing turning down, he does not see where the urgency on rates is supposed to come from.

Jackson Hole: The Inflation Measurement Question

The big event of the week is Jackson Hole, which starts on Thursday and runs through Saturday. It is invite only, gathering around 70 central bankers and policy institutions for a series of conferences and meetings, and it is sponsored every year by the Kansas Fed. The keynote is delivered by the Fed Chairman, and Warsh gives his at 10am on Friday. Warsh is a keen supporter of the event, and Russell expects this one to carry policy implications and to give more colour on his thinking. The specific expectation is that Warsh addresses the inflation measurement question. He has said many times that he wants to reform how inflation is measured, and Russell has been making this point for around three months. The Truflation index contains a Warsh measure that runs materially below current Truflation and much lower than headline US inflation, at roughly 2.2 percent. That offers an elegant solution to his problem: rather than defending a 2 percent target while US inflation runs in the mid to high threes, the alternative measure puts it at 2.2 percent. The construction strips out outliers and looks at the medium term trend rather than snapshot moves driven by something like an oil price spike. Russell expects this to be a market mover, and expects markets to be very quiet post PCE into Warsh’s speech as they wait to hear what he has to say. Why the measurement matters: If the target stays at 2 percent but the measure changes, the gap between the Fed’s rhetoric and its inaction closes without a single rate decision. That is the cleanest available route out of the credibility problem the committee has been carrying since the last meeting, and Friday is the venue where it would be introduced.

Markets And Liquidity: Oil Up Eight Dollars, MOVE Above 73

Ten years sit at 4.7 percent, up six basis points from two weeks ago, with twos at 4.23 percent, up three basis points, leaving the two to ten spread steeper at 47.5 basis points. Nasdaq is at 29,000, down 800. The S&P is at 7,660, down 100. Gold is down 300 at 4,649. The dollar index is down 1 percent at 98.86. Oil has moved sharply, with WTI at 86 dollars and Brent at 91, both up eight dollars from two weeks ago. VIX is higher above 15, and MOVE is above 73, which is unsurprising given the moves in the Treasury market. On the Hilbert proprietary global liquidity framework, the five factor model reads 2.34 and the six factor model is identical at 2.34, with a Z score of 0.25. That indicates moderate expansion of liquidity.

Options: The Smile Flips, Calls Now Carry The Premium

The options market has seen dramatic moves. At the money volatility is higher at around 47, but the significant development is in the volatility smile, which now shows value in calls. Five delta puts are at 58, an eleven point premium over at the money. Five delta calls are at 62, a fifteen point premium. Two weeks ago the call side was flat and even discounted, so this is a very large move in the crypto volatility smile. On implied against realised, there has been a great deal of volatility in crypto over the past week. Implied volatility is at 57 with realised at around 44, a premium of roughly thirteen points. That is favourable for the desk, which is generally a seller of volatility and wants the widest possible gap between realised and implied. Volatility measure Now Note At the money vol Higher on the week ~47 5 delta puts 11 point premium over ATM 58 5 delta calls 15 point premium over ATM 62 Implied vol 57 · ~44 ~13 point implied premium Realised vol Source: Hilbert Trader’s Call 24 August 2026 A genuine regime shift on the smile: For months the market paid heavily for downside protection while showing no appetite for convex upside, with the call wing flat to discounted against at the money. The call wing now carries a larger premium than the put wing. Selling calls has gone from having no value at all to being the better side of the surface.

Bitcoin Technicals: Every Topside Level Broken, 90,000 In Sight

On the technical side Bitcoin has broken every significant level on the topside. All the moving averages have gone, the crosses have happened, it is through the 200 day, and it now sits meaningfully above where the resistance levels were. Those former resistance levels have become very significant support, running from around 73,000 down to about 70,000, and there would be a lot of wood to chop to get back through that. Looked at purely on the technicals, Bitcoin is going higher and has 90,000 in its sights. The gamma profile shows some gamma above at 78,000 and more at 80,000, where market makers will be chasing, though open interest has been eviscerated by the significant liquidations that went through on last week’s moves. On the downside there is a little gamma at 70,000, with most of the negative gamma kicking in around 65,000. Max pain is lower than spot in both expiries: end of August sits at 67,000 with around 6 billion dollars of options expiring, and end of September sits at 70,000 with 11 billion dollars of options. This market would not like a significant pullback in Bitcoin from here, though Russell’s ex pectation is that one arrives. BTC level Significance 90,000 Technical target if the break holds 80,000 Further topside gamma 78,000 Topside gamma; market makers chasing 73,000 to 70,000 Former resistance, now major support 70,000 Small downside gamma; September max pain 67,000 End of August max pain ($6bn expiring) 65,000 Most negative gamma kicks in Source: Hilbert Trader’s Call 24 August 2026

DeFi And Funding: Ethena Expands, Basis Trade May Re-emerge

Ethena has seen around 200 million dollars of expansion in USDe, roughly 5 percent, with yields around 4 percent and trending higher. Ethena published a paper a couple of months ago setting out how those yields are generated. They are now active on the institutional lending side and running the RWA basis trade, doing a good deal of what Hilbert does in its basis plus products. Russell expects material movement in Ethena yields if the market starts moving up from here. Funding rates have been erratic. Wednesday and Thursday saw perpetual funding rates in the twenties before calming right back down to roughly where they were. The trend to watch is the traditional basis trade, as distinct from the inverse basis trade the desk currently has on: if Bitcoin is genuinely breaking out, that trade is likely to start re-emerging. intended for professional and institutional investors only. Hilbert Group AB is listed on Nasdaq First North Growth Market.