The move unfolded swiftly towards the end of the morning trading session in the US. Bitcoin had been largely stuck in a range between $61,500 and $65,000 for several weeks, leading to unusually low volatility and prompting traders to increasingly open positions betting on the continuation of this range.
Treasury Action Lit the Fuse
One catalyst was a statement from the US Treasury Department that it would at least double the maximum size of its long-term Treasury securities buyback operations to support liquidity, increasing it from $2 billion to at least $4 billion per operation. The changes are scheduled to take effect on September 9th.
This announcement was significant because the cost of long-term government borrowing had been rising sharply. The yield on 30-year Treasury bonds had reached approximately 5.33–5.34%, nearing a peak not seen in nearly two decades, before falling to around 5.2% on this news.
Lower yields can make riskier investments more attractive by reducing the returns from government bonds. Stocks, gold, and bitcoin benefited from this, as traders interpreted the Fed's step as easing the pressure that had been building in bond markets.
Bitcoin's price also found another source of support. Earlier in the week, US spot bitcoin exchange-traded funds recorded an inflow of $297.6 million, with market data pointing to additional positive flows around August 19th.
Short Sellers Get Caught in a Liquidation Trap
The real acceleration occurred in the derivatives markets. As Bitcoin's price surpassed the $66,000 mark, leveraged traders betting on lower prices began to see their positions liquidated—exchanges automatically closed positions where there was insufficient collateral to cover the losses.
According to statistics from Coinglass.com, over a 60-minute period, liquidations of crypto short and long positions (predominantly shorts) amounted to roughly $1.48 billion. These forced closures compel short sellers to buy back their positions, creating additional demand just as prices are already rising.
Leverage amplified this chain reaction. A trader using 20:1 or 40:1 leverage can lose their entire capital due to a relatively small price move against their position. Each liquidation can push prices higher, triggering the liquidation of the next set of short positions and creating a self-reinforcing squeeze. Over the past day, around 114,538 traders suffered complete losses.
The sharp surge in Bitcoin brought it to levels not seen since early summer. The speed of the move was particularly impressive: the most intense phase unfolded in roughly 15–60 minutes amid a surge in trading volume.
$70,000 – Bitcoin's Next Test
The question now is whether buyers can hold onto the gains after the forced buying subsides. Derivatives can create impressive candles, but sustaining a breakout typically requires steady demand in the spot market, where investors buy bitcoin directly, not through leveraged contracts.
ETF fund flows serve as one indicator of this demand. Continued inflows, stable or declining Treasury yields, and a pickup in spot trading could help bitcoin turn the former resistance area around $66,900 into support and achieve a more confident breakout from the multi-week range.
The danger lies in a trend reversal if leveraged traders start opening new long positions faster than underlying demand develops. The immediate test for bitcoin will be the $69,000 to $70,000 area, where traders will be watching to see if the August 19th spike becomes a sustained breakout or just another 'whipsaw' event fueled by leverage.
As of Wednesday at 11:50 AM Eastern Daylight Time (EDT), Bitcoin is trading at $68,468 per unit.
