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Yesterday we took a deep look into the breakouts and key signals for the bear market from a technical perspective. Today we’re diving into the fundamental reasons behind the move that ignited them.
Bitcoin is back. People are shouting that the bear market is over. Commodities are rallying. The US president is praising other cryptocurrencies. It’s been a big week, and none of it happened by accident, there were two very specific catalysts behind it.
The Treasury Buyback
On Wednesday, the US Treasury announced it will at least double the size of its liquidity support buyback operations for longer dated government debt, lifting the per operation cap from $2 billion to at least $4 billion for securities in the 10 to 20 year and 20 to 30 year buckets. The move came after a bond selloff pushed the 30 year Treasury yield to its highest level since 2007, with the government stepping in to steady a market that had seen a buyers’ strike since late June.
Why does this matter for Bitcoin? When the Treasury buys back its own bonds, it’s effectively becoming a larger, price insensitive buyer in a market that had been struggling to find demand. That pushes bond prices up and yields down, and lower yields change the calculus for every other asset competing for capital. When government debt offers a lower return, investors are pushed further out on the risk curve in search of yield, and that flows through to equities, gold, and eventually to Bitcoin. It’s also a signal, whether intended or not, that the authorities are willing to intervene to support market functioning when conditions get strained, and markets tend to read that as a green light for risk taking more broadly. Lower long end yields also ease pressure on the US fiscal picture and reduce one of the bearish arguments that had been weighing on risk assets throughout the year.
The market reaction was immediate. Yields fell, stocks rallied, gold and silver rallied, and Bitcoin caught a strong bid. That was the move which delivered a 7% increase in Bitcoin on the first day, and we’ve now added another 5% on top of that over the following 24 hours. Bitcoin is up 12% in two days, and now sits nearly 30% above the cycle low we saw at the start of July.
It’s also worth being precise here, this was just the announcement. The doubled buyback operations don’t actually begin until September 9 and run through November 4. Nothing has been bought yet. But markets don’t wait around for implementation dates, they price in the intent. This is a genuinely bullish structural announcement, and the market did exactly what markets do with bullish news, it front ran it immediately rather than waiting for the mechanics to kick in.
The Short Squeeze
The scale of the reaction becomes clearer when you look at what happened in the derivatives market. In the 24 hours following the Treasury announcement, the crypto market saw its largest single day of short liquidations on record, with roughly $2.74 billion in short positions forcibly closed out. For context, shorts made up over 90% of the total liquidations on the day, an unusually one sided outcome that tells you how heavily the market had been positioned for further downside.
Many readers will remember exactly where this sits in contrast to 10/10 last year. That was crypto’s worst day for liquidations on record, close to $19 billion wiped out in total, with around $16.8 billion coming from long positions and $2.5 billion from shorts. That day effectively confirmed the top was in, an overwhelming wave of leveraged longs got flushed out in one violent move, and the market never recovered those highs.
What we’ve just seen is, in a lot of ways, the inverse of that event. Instead of longs getting wiped in a top confirming flush, it was shorts getting wiped in what looks like a bottom confirming flush. The bears, who had been leaning heavily short through months of chop and downside, got caught entirely wrong footed and forced to cover in bulk. Just as 10/10 all but confirmed the cycle top was in, this kind of one sided, record setting short liquidation is the sort of event that has historically lined up with a cycle bottom.
Trump and Hyperliquid
We’ve covered Hyperliquid countless times this year, and we’ve made no secret of our appreciation for the project and our bullish take on it. It’s been one of the best performing assets of the year, and now we have more bullish news to add to the pile. President Trump referenced it directly during a White House speech on Wednesday, saying CFTC Chair Michael Selig is working to bring Hyperliquid into the US in a fully compliant and legal fashion. Hyperliquid currently blocks US users entirely, so a genuine regulatory pathway would be a meaningful shift for the platform.
The market reaction was immediate. HYPE rallied more than 20% on the day and is up close to 6% over the last 24 hours, putting it within touching distance of its all time high and on the edge of open price discovery territory. It’s another reminder of how quickly sentiment can shift when the regulatory backdrop turns supportive, and another data point that this administration is leaning towards bringing more of crypto onshore rather than pushing it away.
Tying It Together
Put together, a Treasury actively supporting bond market liquidity and easing yields, alongside a White House signalling openness to bringing major crypto infrastructure onshore, gave the market exactly the kind of one two punch needed to ignite the technical breakouts we covered yesterday. The trend line break, the 50 EMA reclaim, the inverse head and shoulders completion, all of that needed a catalyst to actually trigger the move, and this week we got two of them on the same day.
If you’re reading this and feeling like the move has already happened and you’ve missed it, it’s worth remembering this is still early. We are not talking about chasing a top, we’re talking about a market that has just shown its first real signs of turning after a long and difficult bear market. Get in touch with your Stormrake broker if you want to talk through what this means for your position, there’s still plenty of runway here.
Stormrake Spotlight: Pax Gold (PAXG) ($4,512)
Stormrake Spotlight: Pax Gold (PAXG) ($4,512)
