Bitcoin Rally Boosted by ETF Inflows Following Record Short Squeeze

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Bitcoin Rally Boosted by ETF Inflows Following Record Short Squeeze

Bitcoin surpassed $80,000, boosted by ETF inflows.

On August 25, Bitcoin surpassed $80,000 for the first time since mid-May, briefly reaching $81,000. This momentum, previously bolstered by a record short squeeze, was further supported by capital inflows through U.S. spot Bitcoin ETFs: over six trading sessions, the funds attracted approximately $2.26 billion.

At the time of writing, the leading cryptocurrency is near the $80,000 mark. Its price has increased by more than 25% over the week

On August 20, about $3 billion in positions were liquidated, with approximately $2.7 billion in shorts. The following day, another $1.2 billion in short positions were forcibly closed. CryptoQuant contributor BorisD warned that after this mechanism is exhausted, the market will need organic spot demand.

New data partially addressed this issue: last week, U.S. spot Bitcoin ETFs attracted $1.92 billion, with an additional $337.56 million net inflow on August 24. This marks the sixth consecutive positive trading session. BlackRock’s IBIT accounted for $208.93 million, while Fidelity’s FBTC saw $104.57 million.

Another signal emerged on Coinbase. On August 24, the Bitcoin premium index on the U.S. exchange briefly turned positive for the first time in 98 days, reaching 0.0032%. However, the next day, it returned to -0.0141%.

Opinions

Former BitMEX CEO Arthur Hayes, in his new essay Same Same But Different, declared the start of a new Bitcoin bull market. He attributes this primarily to U.S. Treasury Secretary Scott Bessent’s policy on the government bond market.

On August 19, the Treasury announced it would at least double the maximum volume of operations to buy back previously issued Treasury securities with maturities of 10–30 years. The limit will increase from $2 billion to at least $4 billion per operation. The new parameters will take effect on September 9 and remain until November 4.

The Treasury’s bond buyback is not quantitative easing by the Fed. The official goal of the program is to maintain liquidity in specific segments of the Treasury securities market.

Hayes interprets the mechanism more broadly. He suggests that market pressure will force the Treasury to gradually increase support, ultimately boosting dollar liquidity. He compared the situation to Janet Yellen’s policy at the end of 2023, when changes in the structure of government borrowing coincided with subsequent growth in the crypto market.

Billionaire and former hedge fund manager Stanley Druckenmiller offered a contrasting view in his column for the WSJ. He called the expansion of the buyback program a mistake and warned of risks to confidence in the U.S. government debt market.

According to the investor, high yields reflect fundamental issues: the pace of nominal economic growth, the budget deficit, and federal debt exceeding $40 trillion. Druckenmiller believes liquidity tools do not address these causes.

“Governments that defend prices against fundamental factors always lose,” wrote Druckenmiller.

The bond market has yet to confirm the sustainability of the initial reaction to the Treasury’s decision. The yield on 10-year Treasuries has returned to around 4.7%, while 30-year yields are back to 5.22%. Previously, the latter reached 5.335%, the highest in about 19 years.

Rally Brings Market Closer to Overheating Zone

The growth extended to major altcoins. Over the week, Ethereum gained 31.02%, XRP 49.79%, and Solana 31.98%

Signs of overheating have also intensified. According to Bitfire Research, Bitcoin’s relative strength index (RSI) rose to about 78, writes CoinDesk. The options market also sends mixed signals: on August 24, one or more traders spent $2.9 million on 2,000 call options with a strike price of $82,000 and expiration on September 4.

Earlier in August, BlackRock analysts linked the preceding sell-off to deleveraging, outflows from exchange-traded products, and capital rotation into AI assets, but maintained a positive outlook on the long-term role of the leading cryptocurrency in portfolios.

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Source: forklog.com