Treasury Buybacks Trigger Crypto Short Squeeze, Bitcoin Near $77K

The US Treasury doubled its long-duration bond buyback program this week, flooding the financial system with liquidity and pushing the dollar lower. The move triggered a short squeeze across crypto markets that sent Bitcoin surging near $77,000, traders said.

Bitcoin rose 23.6% over seven days, its biggest weekly gain in months. The Fear & Greed Index swung from 29 last week to 72 by Thursday, a sentiment reversal that caught leveraged shorts off guard, according to Alternative.me data.

Spot Bitcoin ETFs pulled in roughly $1.6 billion from Monday through Thursday, the strongest weekly pace of 2026, Bloomberg data showed. That kind of institutional demand suggests traditional finance allocators saw the Treasury's liquidity signal and moved quickly to add crypto exposure, several analysts said.

The ETF flow data represents sticky institutional capital rather than leveraged futures speculation, the analysts added. When BlackRock's and Fidelity's Bitcoin funds absorb that volume, it reflects a deliberate portfolio decision by advisors and fund managers.

Ethereum climbed to around $2,400, up 5.0% in 24 hours. Solana held above $91 with a 6.2% daily gain. XRP pushed past $1.40. The best-performing category over the week was Bitcoin forks, up 39.5%.

The breadth of the rally pointed to genuine liquidity expansion rather than rotation, traders said. In weak rallies, Bitcoin tends to suck liquidity away from altcoins. When major tokens rise together and speculative categories lead, it suggests a macro-driven catalyst.

When the Treasury buys back long-duration bonds, it pushes prices up and yields down. Lower long-term yields make risk assets, including crypto, relatively more attractive. The buybacks also inject cash into the hands of bondholders who sold, and that cash needs to find a home, traders said.

The dollar weakened in response. A softer dollar tends to act as a tailwind for Bitcoin and other digital assets, partly because it makes dollar-denominated assets cheaper for international buyers, partly because it signals easier financial conditions ahead.

The sustainability of this move depends on whether the liquidity impulse from Treasury buybacks continues or fades. Bond buybacks are not a one-time event. If the Treasury maintains or expands the program, the tailwind for risk assets could persist well beyond this initial squeeze, analysts said.

Dollar weakness is the variable to monitor. If the greenback continues to soften, it reinforces the bullish case for crypto. If the dollar stabilizes or bounces, some of this week's gains could give back quickly, especially in altcoins where positioning is thinner, traders said.

The speed of the sentiment shift, from Fear to Greed in under a week, warrants caution. Rapid sentiment reversals can overshoot in both directions. Traders who were too bearish last week could easily become too bullish this week, several analysts noted.

ETF flow data over the next two weeks will be the clearest signal of whether institutional appetite is building into something structural or whether this was a one-week burst of opportunistic buying, traders said. If flows stay above $1 billion weekly, the rally has a foundation. If they drop off sharply, the squeeze may have already priced in most of the good news.

The macro setup has shifted meaningfully in crypto's favor, traders said. The Treasury did what the Fed would not: it loosened conditions without waiting for a crisis. And crypto, after months of tight ranges, finally had a catalyst to trade on.

Bitcoin traded near $77,000 late Friday, up 23.6% for the week.

Read more: Bitcoin (BTC) profile and crypto market analysis