Bitcoin steadies as gold extends powerful rally

Bitcoin held close to $78,000 on Monday after its strongest weekly advance in more than three years, while gold climbed to a three-month high and major alternative cryptocurrencies paused after sharp gains.

The largest cryptocurrency was trading around $77,000-$78,000 after gaining about 23% over the week ended August 23. Bitcoin briefly rose above $79,000 during the surge, its highest level in roughly three months, before profit-taking and a cooling of leveraged buying slowed the advance.

The rally accelerated after the US Treasury announced on August 19 that it would at least double the maximum size of liquidity-support buybacks for longer-dated government securities. The ceiling for individual operations in the 10-to-20-year and 20-to-30-year sectors will rise to at least $4 billion from $2 billion from September 9, with the programme continuing through the current refunding quarter ending November 4.

Markets interpreted the measure as supportive for liquidity at a time when elevated government borrowing and higher long-term yields had weighed on financial assets. The announcement pushed investors back towards assets considered sensitive to dollar weakness and changing liquidity conditions, including bitcoin and gold.

Bitcoin’s climb also forced traders who had positioned for further declines to close bearish bets. More than $3 billion of short positions were squeezed during the strongest phase of the move, adding mechanical buying pressure as exchanges automatically liquidated leveraged positions. Wider estimates covering the multi-day rally put total short liquidations above $4 billion.

Institutional flows strengthened the advance. US-listed spot bitcoin exchange-traded funds attracted about $1.6 billion during four trading sessions through Thursday, including more than $600 million on Thursday alone. Broader cryptocurrency investment products drew their strongest weekly inflows for months, indicating that the rebound was not driven solely by leveraged traders.

Bitcoin closed the week at about $77,387, rising $14,264 over seven days, its largest dollar-denominated weekly increase on record. The percentage gain was about 23%, the strongest weekly performance since March 2023. The move marked a sharp reversal after bitcoin had fallen below $60,000 earlier this year following a prolonged reduction in risk appetite.

Alternative cryptocurrencies participated strongly. Ether climbed close to 30% during the rally, while XRP, Solana and several smaller tokens recorded even larger gains. XRP rose nearly 40% at one stage, while Hyperliquid, Zcash and Chainlink advanced more than 30%, pointing to a broadening of speculative demand beyond bitcoin.

Trading was calmer on Monday. Ether and several major tokens remained modestly higher, but momentum slowed as investors assessed whether last week’s move could attract sustained spot demand. Bitcoin’s ability to hold above the mid-$70,000 range is being watched as an indication of whether institutional buying can replace the short-covering that amplified the initial surge.

Gold provided another signal that the move extended beyond cryptocurrencies. Spot gold climbed above $4,640 an ounce on Monday, its highest level in more than three months, after advancing about 5% last week. A softer dollar and concerns surrounding government borrowing supported demand for bullion, while investors awaited US inflation data and guidance from Federal Reserve Chair Kevin Warsh.

The simultaneous strength of bitcoin and gold has revived the so-called debasement trade, in which investors seek assets with constrained supply when confidence in currencies or government finances weakens. US federal debt has moved above $40 trillion, while long-term borrowing costs remain elevated despite Treasury efforts to improve bond-market liquidity.

Regulatory expectations have added another layer of support. Washington has intensified efforts to establish clearer rules for digital-asset markets, including work surrounding the proposed Clarity Act and regulatory frameworks being developed by the Commodity Futures Trading Commission. Expectations of firmer market structure rules have helped reduce some of the policy uncertainty that weighed on cryptocurrencies during earlier sell-offs.

Arabian Post – Crypto News Network