Bitcoin's latest 22% breakout may have started with a shift in U.S. Treasury-market liquidity, but analysts say its staying power will depend on whether ETF inflows and spot demand can replace the initial macro boost.
Treasury Buybacks Triggered the Initial Rally
Bitcoin surged roughly 22% during its breakout week as long-term Treasury yields fell and the dollar weakened following the U.S. Treasury's decision to expand buybacks of longer-dated government debt. The Treasury said on Aug. 19 that it would at least double the maximum size of liquidity-support buybacks for 10-to-20-year and 20-to-30-year nominal Treasuries, raising them from $2 billion to at least $4 billion per operation. The larger operations are scheduled to begin Sept. 9.
Fabian Dori, chief investment officer at FINMA-regulated digital asset bank Sygnum, said Bitcoin's behavior alongside other markets suggests the first stage of the rally had a strong macro component. The Treasury announcement temporarily pushed long-term yields lower while weakening the dollar and lifting both gold and Bitcoin. This rally context builds on the eight straight days of Bitcoin ETF inflows we reported earlier.
Short Covering and ETF Demand
Dori noted that Bitcoin-denominated open interest fell during the rally while funding rates remained contained. Bitcoin futures open interest recently declined to roughly 587,584 BTC, its lowest level in nearly five months. Rather than showing traders aggressively piling into leveraged long positions, the combination points toward forced short covering. A record $2.7 billion in crypto short positions were liquidated as Bitcoin cleared its previous trading range.
U.S. spot Bitcoin ETFs recorded eight consecutive sessions of inflows through Wednesday, attracting about $2.8 billion over the streak. Martin Lee, Market Insights Lead at DWF Labs, said ETF flows, futures basis and Bitcoin's pre-breakout range will show whether the rally has a durable structural bid. This analysis connects to the Bitcoin bull score reaching 80 earlier this week.
Sept. 9 Becomes the Next Liquidity Test
The larger Treasury buybacks do not begin until Sept. 9, raising the question of how much of their expected impact markets have already priced in. BNY Markets said the decline in the term premium following the Treasury announcement had largely retraced, with long-term yields returning close to levels seen before the Aug. 19 announcement. Bitcoin has therefore reached a point where crypto-specific buying may need to carry more of the rally.
Dori said rising long-end yields would suggest that the buybacks are failing to provide the expected support, while a rebuilding of the Treasury General Account could withdraw liquidity. Lee similarly argued that a rally on anticipation is only as durable as the flow that follows it. The more bearish combination would be Bitcoin closing back inside its pre-breakout range while ETF flows turn negative.
