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Bitcoin was trading around $77,000, holding last week’s explosive gains but below $80,000.
The cryptocurrency surged more than 20% last week and reached roughly $79,500 on Friday, its highest level in about three months.
The rally reflected Treasury bond buybacks, a weaker dollar, ETF demand, regulatory optimism and a historic short squeeze.
But the market now faces a different test. The forced buying that powered the first leg is fading, leaving Bitcoin dependent on sustained institutional demand and friendlier rates.
Short squeeze got Bitcoin here, but that fuel is fading
More than $4.3 billion in bearish crypto positions were liquidated from Wednesday onwards as prices jumped. Short sellers were forced to buy back positions as prices rose, adding fuel to the move.
That mechanism cannot continue indefinitely.
MEXC Research chief analyst Shawn Young told The Block that the Treasury had “opened a pressure valve,” but crypto markets priced the intervention like a much broader change in monetary conditions.
He argued that the bond move forced shorts out faster than it improved Bitcoin’s underlying macro case.
Zeus Research analyst Dominick John made a similar point. Once crowded short positions are cleared, he told The Block, the rally must stand on its own through fresh spot demand, liquidity and stronger fundamentals.
Getting from the mid-$60,000s to nearly $80,000 needed a trigger, but clearing $80,000 may require conviction.
ETF buyers are back, but they need to stay
The rally is not simply a short squeeze. US spot Bitcoin ETFs attracted $1.9 billion in net inflows last week, their strongest weekly total of 2026
Thursday brought $606.3 million, led by roughly $503 million into BlackRock’s IBIT. Wednesday added $517.2 million, showing that institutional buying strengthened as Bitcoin accelerated.
As per market data, Bitcoin-focused investment products attracted roughly $1.6 billion by August 20, helping flows recover after a weaker stretch.
The question is whether that demand can persist after such a rapid price rise.
CryptoQuant founder Ki Young Ju noted that demand in Bitcoin spot and perpetual markets turned positive together for the first time since the October 2025 peak.
But Ju cautioned that the scale remained modest. He said the improvement would need to hold for another month before it could reasonably signal a new bull cycle.
The bigger obstacle may still be the Fed
Bitcoin’s rally also reflected the Treasury’s decision to increase liquidity-support buybacks of longer-dated government bonds.
The announcement initially weakened the dollar and improved liquidity expectations, conditions that tend to help risk assets.
But long-term yields remain elevated, meaning Treasuries still compete with Bitcoin for capital.
CoinShares head of research James Butterfill said in an August 20 market update that Bitcoin was likely to remain range-bound, calling the $80,000 area an “important upper boundary.”
As per analysts, a decisive move would probably require clearer evidence from the Federal Reserve that policy risks have shifted away from further tightening.
Source: cryptonews.net