Bitcoin Surges Above $79,000 as Institutional Demand and Short Squeeze Fuel Rally

Bitcoin's price has jumped 3% to $79,739 on Tuesday as renewed inflows into spot bitcoin exchange-traded funds (ETFs) and improving risk appetite extended the cryptocurrency's recent rally. The sharp rally began last week when Bitcoin surged more than 20% in three days, its biggest gain since 2023.

The gains were partly fueled by a short squeeze, with over $4 billion in bearish crypto positions liquidated as prices rose. Additionally, the U.S. Treasury's announcement to double its purchases of longer-dated government bonds briefly pushed yields lower and revived demand for risk assets. Growing concern over inflation and government debt has also boosted interest in scarce assets.

Institutional demand has returned, with U.S. spot Bitcoin ETFs attracting $1.92 billion in net inflows last week, their largest weekly haul since October 2022 when Bitcoin reached its previous cycle peak. However, questions remain over whether the breakout can last, as a similar surge in January 2023 initially faded before the cryptocurrency found support around its 200-day moving average.

According to Fundstrat, the buying that followed last week's short squeeze suggests Bitcoin's rally may be 'more durable than a tactical bounce.' They pointed to strong inflows into Bitcoin and Ethereum ETFs, increased trading, and the creation of more stablecoins which investors often use to buy cryptocurrencies. Ether last traded 2% higher at $2,494.