Analyst: Bitcoin's 24% rally faces a test of the $70,000 mark as yields rebound

Bitcoin hit its largest weekly gain since March 2023, approaching the US$80,000 mark.

Bitcoin gained about 24% last week, hitting a three-month high of around US$79,550. Analysts pointed out that further gains may depend on the trend of U.S. Treasury yields, continued growth in demand for spot ETFs and the advancement of the CLARITY Act.

Key Summary

·Bitcoin rose about 24% last week, hitting a three-month high near $79,550.
·The net inflow of U.S. spot Bitcoin ETF last week was approximately US$1.9 billion.
·Analysts believe that this round of breakthrough is related to government bond repurchase, ETF demand and forced liquidation of short positions.
· BTSE's Jeff Mei believes the $80,000 to $90,000 range is achievable, but warns of a possible pullback to $70,000.

Bitcoin prices held steady around $80,000 after a weekly surge

Bitcoin traded around $79,800 on August 24, after climbing from below $64,000 on August 19. In this round of gains, Bitcoin hit about US$79,550, the highest level since May.

Gadi Chait, investment manager at Xapo Bank, said that last week's increase was about 24%, which was Bitcoin's strongest weekly performance since March 2023.

U.S. policy trends have driven this trend. On August 19, the U.S. Treasury Department announced that it would at least double the maximum size of its liquidity-backed treasury bond repurchase operations to target 10-to 30-year nominal treasury bonds. Starting from September 9, the scale of each round of operations will increase from a maximum of US$2 billion to at least US$4 billion. Markets interpreted this as an attempt by authorities to improve market liquidity after long-term government bond yields reached levels that put pressure on risky assets.

In addition, US President Trump urged lawmakers to advance the CLARITY Act, rekindling market expectations for clearer encryption regulatory rules. The bill still requires Senate action, and its progress could provide another policy catalyst for markets.

ETF inflows boost Bitcoin's rally

Chait believes that the source of demand behind the rally is as important as the price increase itself. "About $1.9 billion flowed into the U.S. spot Bitcoin ETF, demonstrating real investor demand, while record short liquidations added further momentum."

In the week ending August 21, the U.S. spot Bitcoin ETF recorded capital inflows for five consecutive trading days. Total inflows of about $1.9 billion mark a strong return to institutional demand after funds struggled to attract sustained inflows earlier this year.

These inflows also suggest that mandatory buying in the derivatives market is not the only support for this rally. As Bitcoin broke through resistance levels, traders holding leveraged short positions were liquidated, creating additional market orders and accelerating gains.

Justin d'Anethan, head of research at Arctic Digital, said changes in U.S. interest rate expectations have prompted investors to focus on an asset that has been underperforming for months. "For Bitcoin, due to pent-up demand and months of poor performance, the deal was almost logical, with algorithmic trading and savvy trading companies and asset managers re-entering."

He pointed out that leveraged traders were caught off guard by the breakthrough, triggering what he called the "largest single-day short liquidation event." As the market absorbs this trend, profit-taking and selling by investors who had been waiting to leave could lead to a short-term correction.

Rising treasury bond yields test market narrative

Jeff Mei, chief operating officer of cryptocurrency exchange BTSE, said that as bond yields rise again, enthusiasm for treasury bond repurchases has cooled. "The size of these repurchase operations is still small compared to the US$30 trillion U.S. Treasury market."

Treasury bond repurchase is designed to support market liquidity by replacing old bonds that are less liquid with newly issued bonds. This is not the same as quantitative easing, because the Treasury must finance its operations, and the Fed's asset purchases create central bank reserves.

Mei said the market needs to see whether the Treasury will further expand the size of each round of operations from the original $4 billion ceiling. Without the increase, the plan's impact on the overall bond market may remain limited.

d'Anethan believes that interest rates are the main driver of this rally, pointing out that before expected changes in policy around U.S. Treasurys, ETF funding flows, regulatory progress and large investor activity failed to significantly drive Bitcoin higher.

Chait said that as U.S. Treasuries continue to climb, changes in the macro environment have also strengthened Bitcoin's long-term logic. "Growing debt has raised concerns about potential currency devaluation, while Bitcoin's fixed supply and independence from any government or central bank make it increasingly important."

If the U.S. catalyst continues, Bitcoin is expected to hit US$90,000.

Mei believes that if the U.S. Treasury Department expands the scale of government bond repurchase and the CLARITY Act makes substantial progress before mid-September, Bitcoin may establish a range of US$80,000 to US$90,000. He added that Fed interest rate cuts or other forms of monetary support could provide further upside.

This scenario remains uncertain because higher yields would increase the relative attractiveness of government bonds and increase borrowing costs across the financial system. Therefore, a lack of new policy support or weakening demand for ETFs may leave Bitcoin vulnerable after its rapid rise.

Mei said: "Without further positive catalysts and continued investor confidence, Bitcoin may also retract its recent gains and fall to the $70,000 level again."

The CLARITY Act is another recent U.S. catalyst, but its passage is not guaranteed. Investors will be watching whether lawmakers will move forward with the bill and whether the proposed rules will translate into clearer conditions for exchanges, token issuers and institutional market participants.

Bitcoin charts show potential trend reversal

d'Anethan said that Bitcoin's daily and weekly charts are showing bullish engulfing patterns, while similar monthly signals are forming, but have not yet been confirmed by the candle chart's closing.

These patterns appear after multiple momentum indicators have been in oversold areas for a long time. A recovery in indicators may support a longer-term trend reversal, but the speed of recent gains increases the possibility of consolidation or profit-taking.

Bitcoin faces the challenge after hitting a three-month high of $77,000 to $80,000. Continued breakthroughs above $80,000 will support Mei's proposed $80,000 to $90,000 scenario, while a deeper correction will bring $70,000 back into focus.

According to d'Anethan, if Bitcoin fails to hold on to US$70,000, the median range of around US$65,000 could become a broader accumulation area for long-term investors. However, the short-term direction is likely to depend on bond yields, ETF demand and whether U.S. policy developments translate into action after the initial rally.