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Bitcoin has climbed toward $73,000 after a record short squeeze and falling U.S. Treasury yields powered an 11% rally, but analysts have warned that continued ETF and spot demand will decide whether the breakout holds.
Bitcoin’s short squeeze has accelerated the breakout
Nansen Senior Research Analyst Nicolai Søndergaard told crypto.news that forced short covering accelerated Bitcoin’s rise, although institutional demand and improved liquidity conditions had already given the market an upward bias.
“Bitcoin’s move above $70,000 reflects a combination of forced short covering, renewed institutional demand and a more supportive liquidity backdrop,” Søndergaard said.
Bitcoin traded near $72,600 after reaching about $72,800 on Aug. 20, extending a rally that began when the price cleared resistance around $65,000 and $67,000. The asset had spent roughly six weeks inside a narrow range before the breakout caught bearish traders positioned for another decline.
CoinGlass data showed that more than $1 billion in Bitcoin shorts were liquidated within about one hour. Across the crypto market, short liquidations reached approximately $2.7 billion over 24 hours, the largest total in records dating to 2021. Shorts accounted for about 92% of almost $3 billion in total liquidations across more than 172,000 traders.
As reported earlier on Thursday, Bitcoin gained 11.4% in 24 hours as the liquidations forced traders to buy the asset needed to close their positions. Forced purchases then pushed the price through additional liquidation levels, adding speed to the rally.
Søndergaard said that relatively contained open interest showed that the price increase did not come only from traders adding fresh leverage. Liquidation data also showed far more pressure on shorts than longs, supporting his view that forced covering drove the speed rather than the full direction of the move.
ETF demand may determine whether $70,000 holds
U.S. spot Bitcoin ETFs recorded about $517 million in net inflows on Aug. 19 The daily total was the strongest since May and offered early evidence that institutional buyers were participating alongside traders closing short positions
LVRG Research Director Nick Ruck said the Treasury announcement helped improve institutional sentiment after months of net ETF outflows. Allocators may now view Bitcoin’s recent trading range as a more favorable entry point, he added, rather than a reason to remain on the sidelines.
Ruck cautioned that a single inflow session would not establish a lasting institutional trend. A clearer course for U.S. interest rates, progress on the CLARITY Act, or expanded access through retirement accounts could provide stronger confirmation, according to the analyst.
“Sustained inflows are unlikely without additional confirmation,” Ruck said. “Until those catalysts develop, inflows will likely remain temporary rather than structural.”
Once forced buying fades, Søndergaard expects spot and ETF flows to determine whether Bitcoin can build support above $70,000. The price has moved above its 20-week and 200-day moving averages as well as the estimated short-term holder cost basis near $68,700, placing many recent buyers back in profit.
Momentum readings have become stretched, however. Søndergaard placed the one-hour relative strength index near 78 and the four-hour RSI above 85, while positive funding rates showed that leveraged positioning had become crowded on the long side.
A sustained hold above $70,000 would support the breakout, according to Søndergaard. A retreat into the $69,700 to $69,000 zone could serve as a normal retest rather than confirm a full trend reversal, although losing the area would expose the market to more selling.
CoinEx Chief Analyst Jeff Ko identified the 200-day moving average near $69,000 as the central technical level. Turning the former resistance area into support would strengthen the setup, he said, especially after approximately $650 million in net ETF inflows during the week.
Lower Treasury yields have eased pressure on Bitcoin
The rally began as the U.S. Treasury announced that it would at least double its long-end liquidity-support buybacks. Beginning Sept. 9, the maximum purchase size for nominal coupon securities in the 10-to-20-year and 20-to-30-year sectors will rise from $2 billion to at least $4 billion per operation.
Following the announcement, the 30-year Treasury yield fell from 5.34%, its highest level in 19 years, to about 5.19%. Falling yields reduce the return offered by low-risk government debt and can make assets such as Bitcoin more attractive to investors willing to accept additional volatility.
Nick Ruck said lower yields also ease financial conditions and reduce borrowing costs for companies and investors. Continued buybacks could support risk assets for several months if long-term rates remain contained, he added, while renewed inflation or fiscal concerns could reverse the relief.
Ko described the program as a liquidity-management tool rather than quantitative easing because the Treasury is changing the composition of its liabilities instead of creating central-bank money. Given the program’s limited size compared with the Treasury market, he interpreted the announcement mainly as a policy signal that officials are prepared to support liquidity at the long end.
BTSE Chief Operating Officer Jeff Mei also called the buybacks a short-term response to a lasting fiscal problem. The purchases may cool yields, but they do not reduce the federal deficit or remove inflation pressure, he said.
“When yields drop and the dollar weakens, risk assets tend to rally, and we’ve already seen Bitcoin move higher on the news,” Mei said.
For borrowing costs to remain lower, Mei said markets would need evidence of a slowing U.S. economy or a resolution to the U.S.-Iran conflict. Without progress on either issue, persistent inflation and government borrowing could push yields back up.
U.S. policy has added a political premium
Bitget Wallet Research Analyst Lacie Zhang said Bitcoin has started trading with a U.S. political premium as the White House presses for crypto legislation before the November midterm elections.
During an Aug. 19 event with executives from Coinbase, Gemini, Ripple, Chainlink Labs, and other companies, President Donald Trump urged Congress to approve what he called a “fair version” of the Digital Asset Market Clarity Act. The bill would establish federal market rules and divide oversight between the SEC and CFTC.
Previous White House event coverage detailed the approaching Senate test, which requires 60 votes to advance the legislation. Lawmakers are expected to return in September, leaving limited working time before campaigning for the midterms takes priority.
Zhang said the administration has an incentive to show lower borrowing costs, strong financial markets, and progress in high-growth industries before voters go to the polls. Democrats gaining Senate seats could expose the administration’s crypto policies to added scrutiny, which gives the White House and industry groups a reason to seek legislation before the election, she added.
The SEC supplied another policy catalyst on Aug. 18 by proposing Regulation Crypto Assets, a framework for certain investment contracts involving digital assets. The proposal includes an exemption for offerings of up to $5 million over four years and another for qualifying offerings of up to $75 million in a 12-month period.
Under the proposed SEC framework, a conditional safe harbor would also address when an investment-contract relationship tied to a crypto asset can end. Stakeholders will have 60 days to submit comments, and the proposal does not change current registration requirements unless the SEC adopts final rules.
Zhang warned that connecting Bitcoin sentiment to the election calendar creates political risk. Failure to move the CLARITY Act, controversy involving political conflicts of interest, or a loss of regulatory momentum after the midterms could weaken investor confidence, she said.
President Xi Jinping’s expected U.S. visit in September could add another political element because Trump has grouped crypto, artificial intelligence and financial technology within his push for American technology leadership. She described the visit as a policy context rather than a direct cause of Bitcoin’s daily move
Ruck said ETF inflows would need support from contained Treasury yields and further regulatory progress to continue. Without those conditions, institutional purchases may appear in isolated sessions instead of developing into a sustained
Source: cryptonews.net