Bitcoin’s Sharpest Rally in Five Months Sparks Liquidation Cascade and Sentiment Flip

Bitcoin’s Sharpest Rally in Five Months Sparks Liquidation Cascade and Sentiment Flip

Cryptocurrency markets experienced a stunning reversal Wednesday as the U.S. Treasury announced plans to significantly expand its long-bond purchasing program, wiping away weeks of bearish positioning in a matter of hours. The sudden shift caught traders off guard, triggering one of Bitcoin’s most forceful single-day advances in months and forcing leveraged bets on declining prices to unwind en masse.

Bitcoin climbed 8.7% during Wednesday’s session, reaching an intraday high of $69,749—a level the digital asset had not approached since early June. The one-day percentage gain marks the steepest daily advance since March 4, ending an extended period where traders had grown accustomed to downward pressure on prices. The rapid advance forced margin traders holding short positions to close their bets at losses, resulting in $1.14 billion in liquidations across cryptocurrency markets within a single hour. Bitcoin-specific short liquidations alone totaled $677.64 million during that window, according to on-chain monitoring data.

Treasury Policy Shift Eases Financial Conditions

The catalyst for the market’s abrupt reversal originated with an announcement from the U.S. Treasury regarding long-bond buyback operations. According to the Treasury’s plan, the government will approximately double the size of long-bond buyback operations, expanding from $2 billion to $4 billion per transaction beginning September 9. Market observers noted that such policy shifts typically compress longer-dated Treasury yields and place downward pressure on the dollar’s value—both conditions that historically provide support for cryptocurrencies.

Lower Treasury yields reduce the opportunity cost associated with holding non-yielding assets like Bitcoin, making such investments more attractive on a relative basis. Simultaneously, a weaker dollar makes dollar-denominated investments cheaper for international purchasers, broadening demand across foreign markets. Traders and analysts quickly dubbed the shift “QE Lite,” drawing explicit comparisons to how traditional quantitative easing programs loosen overall financial conditions and stimulate appetite for risk assets.

The Treasury’s announcement arrived alongside complementary developments that amplified its market impact. A White House meeting between cryptocurrency executives and regulatory officials signaled official interest in the sector, while the SEC separately unveiled a proposal aimed at streamlining registration requirements for certain digital-asset offerings. Collectively, these developments created what market participants characterized as a perfect confluence of tailwinds for cryptocurrency bulls.

Prediction Markets Repriced at Historic Speed

The velocity of sentiment repricing was remarkable, particularly within prediction markets. On Myriad, traders had positioned roughly 70% of wagers on a Bitcoin decline to $55,000 levels prior to the announcement. Within 24 hours, odds had compressed to nearly coin-flip territory: 51.9% for the bearish outcome versus 48.1% favoring a rally toward $84,000. The dramatic repricing illustrated how rapidly markets absorb macroeconomic information and adjust risk pricing accordingly.

Equities exposed to cryptocurrency developments followed suit. Strategy rose nearly 12% on the session, while Coinbase, Circle, and BitMine each posted gains between 9% and 10%, reflecting renewed confidence in industry fundamentals and growth prospects.

The episode underscores the increasing influence of macroeconomic policy on digital-asset valuations, often overwhelming technical indicators and on-chain data in driving short-term price discovery. Treasury policy shifts toward monetary easing typically support Bitcoin and crypto assets, making these decisions critical signposts for investors across the broader digital-asset ecosystem.

Source: U.S. Treasury, via Decrypt. Not financial advice.