Bitcoin Reclaims $80,000 as Treasury Bond Plan Fuels ‘Debasement Trade’ Rally

Bitcoin briefly touched $81,257 in early trading Tuesday, its highest level in more than three months, before settling around $79,300. The original cryptocurrency has rallied roughly 23% in the past seven days — its strongest weekly performance since early 2023 — and is now up about 25% since early last week. The move pushed it back above the psychologically significant $80,000 mark for the first time since mid-May.

The catalyst, analysts across multiple sources agree, was a macro shift rather than crypto-specific news. On Aug. 19, Treasury Secretary Scott Bessent announced the government would at least double its monthly purchases of long-dated Treasury bonds to $4 billion, starting in September, in an effort to lower long-term bond yields. The move sparked a fresh round of dollar selling and revived what market participants call the “debasement trade” — investors shifting out of cash and government bonds into scarce assets like gold, silver and Bitcoin.

“This bitcoin rally is being driven primarily by macroeconomic factors rather than by dynamics specific to the crypto market,” said James Butterfill, head of research at CoinShares, as reported by Morningstar and the Daily Mail. “The strong trigger in bitcoin was driven by Treasury’s move to buy back bonds at the longer end of the yield curve,” wrote Bernstein strategist Gautam Chhugani in a research note cited by the Daily Mail.

Bitcoin was originally created as a way to escape fiat currency debasement, and the rally has drawn parallel gains in gold and silver, both of which rose nearly 7% over the past week. “The macro backdrop turned more supportive after the Treasury’s expanded long-dated buyback plan helped weaken the dollar and revive the ‘debasement trade’ across Bitcoin and gold,” said Lacie Zhang, a research analyst at Bitget Wallet, as reported by NDTV Profit and Business Standard.

Short Squeeze and ETF Inflows Amplify the Move

The macro trigger was supercharged by a short squeeze that forced leveraged bearish traders to cover their positions. According to Coinglass data cited by multiple sources, about $7.2 billion in short crypto positions were liquidated last week. The squeeze, combined with a prolonged period of low volatility and one-sided positioning, produced outsized price reactions. Bitwise’s head of research Europe André Dragosch, quoted by Morningstar, noted that the firm’s “seller-exhaustion indicator” had fallen to its lowest level since November 2018 ahead of the rally.

“Once prices started moving higher, leveraged short positions were forced to close,” Dragosch said. “There was a record amount of liquidated short positions, which added another layer of buying pressure, creating a classic short squeeze.”

Institutional demand also returned in force. U.S.-listed spot Bitcoin exchange-traded funds recorded net inflows of $1.92 billion last week, their strongest week since early October, according to Bloomberg data cited by NDTV Profit. Morningstar reported a higher figure of $2.36 billion for the week, while Nasdaq reported over $2.2 billion in inflows since Aug. 17. The iShares Bitcoin Trust ETF gained $209 million and the Fidelity Wise Origin Bitcoin Fund added $105 million on Monday alone, according to Nasdaq.

Those inflows collided with tight available supply. Roughly 60% of Bitcoin in circulation has not moved for over a year, according to Cici Lu McCalman, founder of Venn Link Partners. “A lot of Bitcoin effectively isn't available to trade,” she said, as reported by NDTV Profit and Business Standard. “So when ETF demand suddenly accelerates, the marginal available supply can be quite tight.”

Regulatory Optimism Provided Additional Support

The Treasury announcement coincided with a White House meeting between President Donald Trump and crypto industry leaders, including Coinbase CEO Brian Armstrong, Kraken co-CEO Arjun Sethi and Robinhood CEO Vlad Tenev, as reported by Gizmodo. Trump urged the Senate to pass the Clarity Act, an industry-backed bill that would establish clearer regulatory rules for digital assets. The bill stalled before the August recess but is expected to be taken up again in mid-September, with a procedural vote scheduled for Sept. 15, according to the New York Post and NDTV Profit.

“The Clarity Act is driving sentiment, but I don't think it will pass this side of midterms — and this disappointment could also lead to a sell-off,” warned Nic Puckrin, markets expert and former Goldman Sachs analyst, as reported by the Daily Mail. Puckrin, now founder of Coin Bureau, told the New York Post that the rally is vulnerable to a sudden reversal after the massive short liquidation.

Skepticism Remains Over Sustainability

Several analysts have cautioned against treating the move as a confirmed new trend. The rally faces headwinds from persistent inflation and the potential for Federal Reserve policy tightening. Fed Chair Kevin Warsh is scheduled to deliver a keynote at the Jackson Hole symposium on Friday, a speech markets will watch closely for signals on interest rates. “Chair Warsh's keynote at Jackson Hole on Friday should give us a better idea of whether the Fed is leaning hawkish or dovish — and any indication that it's more hawkish will weigh on Bitcoin's price,” Puckrin told the Daily Mail.

Rate hikes would push bond yields higher and pull capital out of speculative assets like Bitcoin. The Personal Consumption Expenditures inflation reading on Wednesday and GDP data later this week could provide early clues on the Fed's direction, Puckrin noted in the New York Post.

Other risks include potential selling from Bitcoin miners, who have been under severe financial pressure. The average cost to mine one Bitcoin was just under $80,000 at the end of last year, according to CoinShares data cited by NDTV Profit and Business Standard. “A move higher could prompt supply to sell from this cohort looking to monetize and de-risk their Bitcoin exposure,” said Rajiv Sawhney, head of international portfolio management at Wave Digital Assets.

Bitcoin remains well below its all-time high of roughly $126,000 set last October. The token has been falling for much of 2026 following a selloff after that peak.

“A bull market should not yet be treated as a confirmed trend,” said Bitfire Research Director Allen Ding, as reported by NDTV Profit and Business Standard.