Bitcoin briefly hits $70,000 for the first time since June. Here is why

Bitcoin has surged to near the $70,000 mark for the first time since June, experiencing a surprising rally after months of selling pressure. The cryptocurrency jumped nearly 6%, reaching over $69,000. This price jump transpired just after the Treasury Department disclosed plans to double the purchase of older long-term government bonds. The market interpreted this move as a form of quantitative easing, which weakens the dollar and drives up scarce, hedge assets like Bitcoin.

Investors swiftly amassed Bitcoin, prompting short sellers to cover approximately $1.5 billion in positions by purchasing the cryptocurrency in the market. This included a staggering $700 million investment in a single minute, potentially marking the largest short squeeze in Bitcoin's history. The rally follows a series of weak price actions as Bitcoin struggled to recover from a severe crash in October last year.

Since that downturn, which triggered over $19 billion in liquidations, Bitcoin has dropped about 40% from its $115,000 level.

The Treasury announcement, coupled with growing expectations of a pause in rate hikes over the past two months, has heightened investor interest. U.S. spot Bitcoin ETFs witnessed approximately $1 billion in inflows during the initial two weeks of August, providing another demand source for the cryptocurrency. Ethereum and Zcash also led the major tokens, each surging 9% in the past 24 hours.

Zach Pandl, Grayscale's head of research, believes that Bitcoin's bear market may have reached its worst phase, with the cryptocurrency potentially bottoming at $58,000 earlier this summer. He suggests that this could be an opportune time for longer-term investors to allocate to Bitcoin and the crypto asset class, given the deeper fiscal pressures highlighted by the Treasury's move.

Pandl also points to recent favorable developments for the crypto industry, such as the Securities and Exchange Commission's proposal of a regulatory framework for crypto assets, which could reduce uncertainty as the CLARITY Act remains stalled in Congress.