What Boosted the Cryptocurrency
Over the past 24 hours, according to data from CoinMarketCap, Bitcoin jumped nearly 8% and reached a high of over $79,240. And since the start of the week, the leading digital currency has risen in price by about 25%. Bloomberg calls this weekly gain the largest since March 2023.
“The main driver [for Bitcoin] was the U.S. Treasury’s decision to double its purchases of long-term bonds [to $4 billion], which led to [some] decline in long-term bond yields [from multi-year highs] and generally increased investors’ risk appetite,” says Rachel Lucas, an analyst at BTC Markets. She noted, however, that the Treasury Department’s decision did not change either Bitcoin’s long-term outlook or its volatility.
An additional factor driving growth was U.S. President Trump’s meeting at the White House with executives from crypto companies, including the CEOs of Coinbase and Payward. During the event, Trump called on Congress to pass the Clarity Act—a bill intended to establish clearer rules for the cryptocurrency market.
The return of euphoria to the cryptocurrency markets forced traders to liquidate billions of dollars in short positions on Bitcoin, according to Bloomberg. According to Coinglass, over the past three days, bets on a Bitcoin decline totaling approximately $2.5 billion were liquidated, and bets on all crypto assets totaled $4.5 billion. The short squeeze remains one of the main drivers of Bitcoin’s rise in recent days, notes Adam Morgan McCarthy, a lead researcher at LO:TECH. Therefore, in his view, the cryptocurrency’s current rally appears less convincing than gold’s rise: “Gold carries the key macro signal of the week: it has risen steadily as the Treasury doubled the volume of its bond buyback operations—and without any forced buying that inflated Bitcoin’s price,” — said McCarthy. “If you want to understand where investors are actually hedging against currency and inflation risks this week—it’s gold, not Bitcoin,” he asserted.
Meanwhile, according to Bloomberg, institutional investors have returned to the cryptocurrency market this week: U.S.-traded spot Bitcoin ETFs may see their largest weekly inflow since January, the agency reports. Since the start of the week, 13 such ETFs have attracted more than $1 billion, fueling “bullish” sentiment in the crypto market.
“For the first time this year, there is a risk that my year-end target [for Bitcoin] ($100,000) may turn out to be too low,” wrote Jeffrey Kendrick, head of digital asset research at Standard Chartered, in a note to clients.
What’s next?
Despite the rally of recent days, Bitcoin is still trading about 40% below its all-time high of $126,000, reached last October. However, the cryptocurrency has already risen by more than 30% from its most recent local low of $58,642 in late June.
“We’re not experts in macroeconomics, but we know that Bitcoin has historically reacted positively to an increase in liquidity. And the current apathy toward Bitcoin and the cryptocurrency markets has been driven by a combination of tightening market conditions following the conflict with Iran, rising inflation risks, and very strong trading in AI/semiconductors, which has siphoned off all liquidity,” according to a note from Bernstein’s analyst team. As hyperscalers continue to seek funding for their large-scale AI ambitions and borrow more aggressively in debt markets, investors may turn to defensive “hard” assets as a hedge—including Bitcoin, the analysts continued. Bitcoin may be a form of digital money, but its code guarantees a fixed supply, which eliminates the risk of devaluation, Bernstein noted.
“The question is no longer how far Bitcoin might fall, but whether [its] correction has wiped out roughly 50% of the excess accumulated during the previous rally, and whether historical ‘bear market’ models still apply to a market where regulation and ownership structures are changing,” MarketWatch quotes Dovilė Silenskienė, head of digital asset research at WisdomTree. Given that Bitcoin has repeatedly experienced peak-to-trough declines that lasted longer than traditional markets can withstand, she cautions against hastily concluding that Bitcoin has already bottomed out.
“Macroeconomic conditions, liquidity, and market participants’ positioning could outweigh fundamental factors, and Bitcoin could very well fall significantly below current levels,” Silenksite warned, noting, however, that such movements “do not negate the merits of investing [in Bitcoin] over the longer term,” according to oninvest.com.
Follow our updates
