On August 25, the leading cryptocurrency broke through the psychological barrier of $80,000 for the first time since mid-May, touching the $81,000 mark during intraday trading. This move was the culmination of two powerful drivers: a record short squeeze and renewed capital inflows into U.S. spot bitcoin ETFs. Over six trading sessions, the funds accumulated approximately $2.26 billion, providing the market with the necessary liquidity after a volatile week.
At the time of data recording, the asset is trading near $80,000. The weekly gain exceeded 25% — an impressive result that restored confidence among market participants after a prolonged consolidation.
The Mechanics of the Rally: From Liquidations to Organic Demand
The key catalyst formed on August 20, when approximately $3 billion in positions were forcibly closed on the market, of which $2.7 billion were shorts. The following day, liquidations continued, adding another $1.2 billion in short positions. Such a short squeeze is a rare event, but it was precisely this that set the momentum, which is now being reinforced by fundamental flows.
Analysts warned that after the effect of liquidations was exhausted, the market would need organic demand. And it arrived. Over the past week, spot bitcoin ETFs attracted $1.92 billion, and on August 24, funds recorded another $337.56 million in net inflows — this is already the sixth consecutive positive session. The flagship remains BlackRock's IBIT ($208.93 million), while Fidelity's FBTC added $104.57 million.
Additional confirmation of the shift in sentiment came from the Coinbase Premium index — on August 24, it turned positive for the first time in 98 days, reaching 0.0032%. Although the indicator returned to -0.0141% the next day, the very fact of the short-term breakout points to growing buying pressure from American investors.
Macroeconomic Backdrop: A Bet on Liquidity
Beyond the crypto market, an important storyline is unfolding. The U.S. Treasury Department announced plans to at least double the maximum volume of operations to buy back long-term Treasury securities — from $2 billion to $4 billion per operation. The new parameters will take effect on September 9 and remain in place until November 4.
Former BitMEX CEO Arthur Hayes interprets this move as the beginning of a new bull cycle, comparing it to Janet Yellen's policy in late 2023, which preceded the growth of the crypto market. According to his logic, pressure on the government bond market will force the Treasury to expand support, which will ultimately increase dollar liquidity. However, not everyone shares this optimism. Stanley Druckenmiller, on the contrary, called the expansion of the buyback program a mistake, pointing to fundamental problems: the budget deficit and federal debt exceeding $40 trillion. The yield on 30-year Treasuries has already returned to 5.22%, close to 19-year highs.
Overheating on the Horizon
The rally was not limited to bitcoin: Ethereum rose 31.02% over the week, XRP — 49.79%, Solana — 31.98%. However, indicators are beginning to signal overheating. Bitcoin's Relative Strength Index (RSI) has risen to 78, approaching the overbought zone. Activity is also noticeable in the options market: on August 24, traders spent $2.9 million on 2,000 call options with a strike price of $82,000 and expiration on September 4.
My view: The current dynamics are a classic example of how technical momentum (short squeeze) combines with institutional demand (ETF flows). However, the sustainability of the rally will depend on whether the market can hold levels above $80,000 without new macroeconomic stimuli. For now, the fundamental drivers look convincing, but the overheating zone requires caution — a 10-15% correction in the coming weeks would not come as a surprise.