Bitcoin has extended its robust rebound this week, with the price climbing as much as 9.4% to an intraday high of $79,500 on Friday. The cumulative weekly gain has now expanded to approximately 23%. Should this momentum hold through the weekend, it would mark Bitcoin's strongest weekly performance since March 2023. Concurrently, renewed inflows into US spot Bitcoin ETFs, sustained short covering, and supportive cryptocurrency policy signals from the US government have collectively fueled a rapid improvement in market sentiment. The digital asset is now within striking distance of the $80,000 threshold, a level it last approached in May of this year. Despite the substantial recent rally, Bitcoin remains significantly below its all-time high of over $126,000 set in October last year. During the subsequent sharp correction, the asset dipped to $58,642 at the end of June.

Expanded Treasury Buyback Program Acts as Key Catalyst

A pivotal turning point in the current crypto rally occurred on Wednesday when US Treasury Secretary Scott Bessent announced that the Treasury would at least double the size of its long-term debt buyback program. Following this news, long-term Treasury yields retreated, leading to a rapid improvement in risk appetite across financial markets. This shift in sentiment propelled risk assets, including Bitcoin, higher. Rachael Lucas, an analyst at BTC Markets, noted that the expansion of the Treasury's long-term bond repurchase program has been a significant driver behind the move. The resulting decline in long-term yields has improved risk sentiment throughout the market. Adding to the positive momentum, former President Donald Trump met with executives from several cryptocurrency firms, including leadership from Coinbase and Payward, at the White House on Wednesday. This meeting reinforced market expectations of a supportive stance toward the digital asset industry. Trump also urged the US Senate to pass the "Clear Act," a cryptocurrency market structure bill. The legislation had stalled in the Senate due to disagreements over ethics provisions and was not voted on before the August recess.

$4.5 Billion in Crypto Shorts Liquidated in Three Days, Bitcoin Rally Still Driven by Short Squeeze

Beyond the improving macroeconomic environment, Bitcoin's rapid ascent continues to exhibit pronounced short-squeeze characteristics. Data from Coinglass indicates that over the past three days, approximately $2.5 billion in leveraged short positions in the Bitcoin market alone have been liquidated. Across the entire cryptocurrency market, the total value of bearish leveraged positions liquidated has reached roughly $4.5 billion. As prices have climbed swiftly, short sellers have been compelled to buy Bitcoin to cover their positions. These forced purchases have, in turn, pushed prices higher, triggering additional short liquidations and creating a self-reinforcing upward spiral. Adam Morgan McCarthy, Chief Researcher at LO:TECH, believes that the short squeeze remains a significant force driving Bitcoin's current rally. Notably, bearish bets against BlackRock's IBIT, the world's largest spot Bitcoin ETF, have also been increasing. S3 data shows that short interest in IBIT has risen steadily this year, with short positions now representing approximately 3% of the fund's outstanding shares. IBIT currently manages assets of around $55 billion. However, McCarthy suggests that gold may more accurately reflect investors' genuine hedging demand against currency and inflation risks compared to Bitcoin. He points out that gold, which also rose to its highest level since May this week partly due to the Treasury's expanded bond repurchase program, did not experience the mechanical buying pressure seen in Bitcoin's market from large-scale forced short covering.

ETF Inflows Return, Exceeding $1 Billion in Net Purchases This Week

Unlike the earlier phase of the rally, which was primarily dependent on short covering, a more encouraging signal has emerged this week as institutional capital re-enters the Bitcoin market. The 13 US-listed spot Bitcoin ETFs have attracted over $1 billion in net inflows this week, positioning them for their largest weekly inflow since January. This indicates that, alongside short covering, fresh real buying demand is emerging, providing more sustainable support for Bitcoin's rebound. Large Bitcoin holders are also increasing their positions again. Data from CryptoQuant reveals that so-called Bitcoin "whales" have accumulated approximately $2.75 billion worth of Bitcoin over the past 60 days, suggesting that some major investors have concluded their earlier selling and are shifting back to accumulation.

Standard Chartered Suggests $100,000 Year-End Target May Be Conservative

Bitcoin's powerful rally is also prompting Wall Street institutions to reassess their outlook. Geoffrey Kendrick, Head of Global Digital Assets Research at Standard Chartered, stated that for the first time this year, there is a risk that his year-end Bitcoin target of $100,000 could be "too low." Meanwhile, cryptocurrency-related US stocks continued to surge on Friday. Coinbase, the largest US digital asset exchange, advanced 8.2%, while Strategy, a major Bitcoin holder, gained 6.1%. Circle, the stablecoin issuer, rose 5.2%. However, analysts caution that a significant portion of this week's rally has been driven by short liquidations. The key question for the sustainability of the rebound is whether Bitcoin can continue to attract genuine new capital once the short squeeze subsides. Overall, Bitcoin's rally this week has increasingly found support from fundamental buying, moving beyond the initial short covering. The combination of lower yields resulting from the Treasury's expanded long-term bond repurchase program, supportive cryptocurrency policy signals from the Trump administration, over $1 billion in net inflows into spot ETFs, and accumulation by large holders has driven Bitcoin to approach $80,000. However, after a rapid ~23% weekly surge, market volatility risks have also increased. Whether Bitcoin can decisively break and hold above $80,000 will be a crucial test for the continuation of this rebound.