Bitcoin Holds Above $77,000 After Treasury Action Triggers Massive Short Squeeze

Bitcoin was trading steadily above the $77,000 mark on Saturday, consolidating gains after a powerful short squeeze propelled its price to nearly $80,000. The rally was ignited by a U.S. Treasury Department policy shift that eased pressure on risk assets, leaving investors to assess if the move marks a sustainable recovery for the cryptocurrency.

Treasury Move Sparks Rally

The rally gained significant momentum after the U.S. Treasury announced it would double the size of its long-term bond buyback operations from $2 billion to $4 billion each. According to reports from CoinDesk and CNBC, this action prompted the 30-year Treasury yield to retreat from a 19-year high of 5.34% to approximately 5.19%.

This drop in government bond yields is significant for Bitcoin. As a non-yielding asset, Bitcoin often competes with bonds for investor capital. Higher yields make interest-bearing government debt more attractive, while lower yields reduce the opportunity cost of holding assets like Bitcoin. Analysts noted that the buyback program, aimed at improving market liquidity, is distinct from quantitative easing (QE) as it does not involve the Federal Reserve creating new money.

A $4 Billion Short Squeeze

The fall in Treasury yields triggered a cascade of liquidations in the crypto derivatives market. An estimated $4 billion in short positions were forcibly closed on Thursday and Friday as Bitcoin surged past several key resistance levels, including its 200-day moving average of around $69,000.

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The price action was amplified by highly concentrated positions. Key takeaways from the market's reaction include:

• Intense Trading Volume: Data cited by CoinDesk showed Binance recorded $1.26 billion in Bitcoin futures volume within a single 60-second window.
• Rising Leverage: Funding rates, which reflect the cost of holding leveraged long positions, hit their upper limits on several exchanges as traders rushed to bet on further gains.
• Improving Spot Demand: The rally was supported by renewed interest in the spot market, with U.S.-based Bitcoin ETFs recording approximately $650 million in net inflows.

Outlook and Key Levels

Analysts remain divided on whether the rally signals an end to the recent bear market. Bulls point to the powerful short squeeze and the break above key technical indicators as classic signs of a market bottom. However, more cautious observers argue that sustained momentum will require continued ETF inflows and a broader shift toward a more accommodative monetary environment.

They warn that a renewed rise in Treasury yields could challenge the recent breakout. For now, traders are watching $80,000 as the next major resistance level, while the 200-day moving average around $69,000 has now become a critical level of long-term support.