Bitcoin jolted higher, breaking above the resistance at $66K and reaching $69K, during which more than half a billion in short positions were liquidated. The sharp movement coincides with the US Treasury announcing a buyback operation for long-dated securities.
BTC rises above $66K after 2 months
After nearly two and a half months of being restricted below the $66K level, Bitcoin has finally broken above this level, and it is testing the 200-day moving average. Bitcoin entered this phase of fluctuating below $66K after facing a huge crash from as high as $74K back in June.
Since this crash, Bitcoin has only been able to test the $66K resistance level but has not been able to cross above this level. However, just yesterday, the markets made a huge move, taking every one off guard. During this sudden movement, around $500 million worth of short positions were liquidated, as the overall price action was still on a downward trend.
For the uninitiated, a short liquidation occurs when a trader who has bet on Bitcoin’s price falling is forced to close their position after BTC moves higher. For example, if a trader opens a leveraged short position expecting Bitcoin to decline, but BTC instead rises sharply, their losses can become too large for the available collateral.
The exchange then automatically closes the position to prevent further losses. This can create additional buying pressure because closing a short typically requires buying back the asset. As more short positions are liquidated, this forced buying can push Bitcoin even higher, triggering more liquidations in a short squeeze.
US Treasury’s double buyback strategy is a contributing factor: analyst
An analyst stated that the US’s new strategy of buying back long-term securities is a contributing factor to this sudden jerk in the market.
The U.S. Treasury’s decision to increase long-term bond buybacks can support risk assets by easing pressure in the bond market. By becoming a larger buyer of longer-dated Treasuries, the government helped push long-term yields lower, with the 30-year yield falling sharply after the announcement.
Lower yields can reduce the relative attractiveness of government bonds and ease financial conditions, encouraging investors to move toward riskier assets such as stocks and Bitcoin. This helped trigger a sudden Bitcoin rally toward $69,000, while the move higher also forced heavily leveraged short sellers to close their positions, creating additional buying pressure and accelerating the spike.
