Bitcoin held above $78,000 on Tuesday after briefly touching a three-month high, as growing worry over U.S. fiscal health weighed on the dollar and pushed flows into crypto. The move extends a rally that saw Bitcoin surge more than 22% last week, its best weekly showing since March 2023, and has triggered hundreds of millions of dollars in short-position liquidations.
Bitcoin steadied above $78,000 on Tuesday, holding most of last week's gains after briefly hitting a three-month high of $81,220.4 earlier in the session. The token traded flat at $78,740.1 by 18:06 ET (22:06 GMT).
Treasury buybacks spark a debasement trade
The rally traces back to growing anxiety over U.S. fiscal health and the dollar's long-term outlook. That anxiety was triggered last week when the U.S. Treasury unveiled plans to essentially double its pace of bond buybacks to help cap a surge in yields.
This stoked concern that the dollar may bear the brunt of the Treasury's intervention in bond markets, sparking the so-called "debasement trade." According to OCBC analysts: "The Treasury's buyback announcement has shifted the market narrative from higher yields to USD debasement", a shift that has fuelled a weaker dollar and stronger gold.
In turn, investors piled into gold and cryptocurrencies as assets seen as mostly shielded from the bond-market ructions. Bitcoin's dismal year-to-date performance also drew in bargain buyers.
Short sellers get squeezed
Bitcoin's rebound has hit short sellers hard. Data from Coinglass showed the rebound liquidated more than $457 million in short positions over the past 24 hours, extending a trend that wiped out billions in short positions last week. Ether short positions also took a hit, with $112.3 million liquidated in the past 24 hours.
Ether itself slipped 1% to $2,449.25, as broader crypto prices lost steam after last week's rally. Other tokens fell too, with XRP down 2%, while Bitcoin's own advance has so far held.
Source: Investing.com
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