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Bitcoin’s (BTC) abrupt 20%+ breakout to $79,500 has analysts convinced that a regime change that puts the bull market back in play has started. Adding to the melee, Ether (ETH) and Hyperliquid (HYPE) rallied in excess of 25% and data suggests that the current rally is more than just a random one-off.
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Crypto Reaches an Inflection Point
Reflecting on the significance of the crypto market price action, Helios Analytics founder Jamie Coutts said,
“Once you volatility-adjust the move (Bitcoin has been in a structural volatility downtrend), this week’s 2-day move is the fifth-largest since 2018 (a 4.4 sigma move). It doesn’t read as a normal countertrend rally. The 2018 & 2019 lows both had a volatility squeeze, followed by a big impulse move higher. Both were large in % terms but not as big as this one in volatility-adjusted terms.”
Coutts explained that the “magnitude of the move” may mark a paradigm shift for the crypto market.
“So a cycle inflection, not a counter-trend bounce, and the forward statistics support that. Bitcoin has been higher >70% of the time 30/90/180 days after moves like this, compared to roughly a coin flip in a random study.”
Bitcoin price action, volatility-adjusted
Bitcoin’s blockbuster move followed the 30-year Treasury yield reaching a 19-year high at 5.33%, before US Treasury Secretary Scott Bessent announced that the Treasury would step in to double its buybacks of long-dated debt.
The expanded buybacks briefly pushed long-term Treasury yields lower and fueled comparisons to yield curve control (YCC). They affirmed what many crypto, commodities and precious metals traders have been waiting for — that the Federal Reserve printer may be turning back on.
Interpreting the buybacks as a form of YCC, 1971 Capital founder Brian Russ said,
“The signal is what matters. They will cap yields. In plain English: the government is buying back its own debt.”
“The signal from Bessent is what matters. The treasury will cap yields. First by increasing buybacks and second through future SLR adjustments, allowing banks to buy and warehouse more treasury bonds. This is yield curve control and bullish for Bitcoin and gold. My view is that the bottom is in for Bitcoin, and the stage is set for a new bull market.”
Regarding the future path markets and investors may select, Hyblock CEO Shubh Varma said,
“Investors eventually realize that America will continue printing and that these liquidity injections erode USD buying power. So the answer is simple. Don’t hold USD. Go buy equities, or really anything pegged against it with long term growth. Investors will choose to protect themselves from the eroding dollar.”
The SEC, White House and CFTC Move Forward on Crypto Regulation
On Aug. 19, the White House upped the ante in favor of bulls by hosting a crypto summit attended by crypto leaders from Coinbase, Robinhood, Kraken, Gemini and Chainlink. While addressing the nation, Trump urged lawmakers to pass the CLARITY Act and emphasized that the US is not going to slow down in its aspiration to become the central hub for the cryptocurrency industry.
Separately, SEC chair Paul Atkins and CFTC chairman Michael Selig both said their agencies would continue advancing crypto rulemaking if the CLARITY Act fails to advance in the Senate.
Digital Chamber CEO Cody Carbone told Fox Business:
“It was very clear from the president’s comments and from the discussion that the U.S. government and the Trump administration are not going to wait, necessarily, for legislation,” he said. “The SEC and the CFTC have been given the authority from this White House and the mandate to move very quickly.”
Adding to the conversation, Coinbase CEO Brian Armstrong told CNBC that “there’s a good chance we’re on the cusp of the next bull market.” In an Aug. 20 interview with Fox Business, Armstrong predicted that Bitcoin may trade in the $300,000 to $400,000 range by 2030.
Altogether, the SEC, CFTC and White House are making good on their stated objective of moving forward on crypto regulation even if the CLARITY Act fails to pass in the Senate
ETF Inflows and Futures Liquidations Surge
More than $4 billion in crypto positions were liquidated from Aug. 20 to Aug. 21, marking what the Kobeissi Letter classified as the “7th largest liquidation event in history.” BlackRock’s IBIT spot Bitcoin ETF, on the other hand, saw daily volumes topping $4.4 billion, the highest level in seven months.
Crypto market liquidations top $4 billion
The move to $79,500 put Strategy’s 840,447 BTC position back in profit, with a $1.4 billion unrealized gain. The company’s Stretch (STRC) perpetual preferred stock rallied to $95.94, narrowing the distance from its $100 per share peg.
With Strategy’s average cost basis at $75,385, the company’s return to profitability may remove the forced-seller tail-risk narrative, but the coming weeks will reveal whether changing market conditions translate to fresh Bitcoin purchases.
For the first time in weeks, retail and institutional investor capital flows are in tandem, with ETF inflows accelerating into a rally fueled in part by short liquidations. This alignment fueled the double-digit gains in BTC and ETH, but with much of the bearish cohort tapped out, extending the rally may depend on sustained demand within spot CEX and ETF markets.
Institutional adoption and digital asset treasury growth also back the crypto market bid and have been in play well before last week’s breakout rally. Multiple 13F filings show a variety of institutional investors increasing their IBIT positions, while Metaplanet, Gemini and Strive (SATA) added Bitcoin to their treasuries.
On Aug. 18, global investment manager VanEck posted data showing eight of 12 Bitcoin capitulation signals were firing, suggesting Bitcoin may have bottomed and that record low volatility hinted at an impending directional move.
According to Fairlead Strategies founder Katie Stockton, Bitcoin’s rally above its 200-day moving average marks a “significant positive long-term development.”
Stockton posted the following chart and said,
“Momentum is strong, putting resistance near $83-$84K within reach. A breakout above that zone would confirm a major bullish reversal.”
What’s on the Radar?
- Buy-side volumes from institutional and retail investors aligned to catalyze last week’s rally. Will each cohort provide the necessary daily volumes to sustain the current bullish momentum? Daily spot and futures cumulative volume delta data and ETF flows are the metrics to watch.
- Coinbase CEO Brian Armstrong told Fox Business that he expects the CLARITY Act to clear 60 Senate votes on Sept.15. Has smart money in crypto markets already been pre-positioned for a successful vote and how will this be expressed across markets?
- Bitcoin’s 25%+ gain locked in its best weekly performance since March 2023, and its fifth-largest two-day volatility-adjusted move since 2018. Will $70,000 hold as a new level of support over the coming weeks?
- The Jackson Hole Economic Policy Symposium is scheduled for Aug. 27 to Aug. 29. Given Treasury Secretary Bessent’s recent comments on bond purchasing, the markets’ reaction, an apparent quagmire in Iran and the looming specter of inflation, the discussions from the symposium should provide plenty of food for thought.
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