After a robust 23% gain last week, Bitcoin and the broader cryptocurrency market have carried that momentum into the current week. On the morning of August 25, Bitcoin surged past the $81,000 threshold, marking the first time it has reached this level since May. By 7:37 PM Beijing time that day, Bitcoin was quoted at $79,000, reflecting a 24-hour increase of 1.14%.
The immediate catalyst for this rally was a historic single-day short squeeze on August 20, which propelled Bitcoin up by more than 8% in a single session. The direct macroeconomic trigger was the U.S. Treasury's announcement to expand its long-duration bond buyback program to a minimum of $4 billion per operation, a move the market interpreted as a positive signal for improving liquidity. Furthermore, the steady return of institutional capital has provided an additional layer of support for this upward movement.
Looking at the market performance since the start of this week, the momentum driven purely by forced liquidations has clearly weakened. Whether the rally can be sustained will largely depend on whether spot buying can take over, with the most critical variable to watch being spot ETFs. According to analysts, the key factors to monitor going forward are the persistence of ETF inflows and the nature of that capital. While ETFs can help maintain upward momentum, they are unlikely to single-handedly restart a bull market. Only when spot demand expands from a single channel to diversified and sustainable capital flows will Bitcoin's price ascent gain more solid support.
Bitcoin Surpasses $81,000: Is This the Bull Run?
On August 25, Bitcoin and the crypto market continued last week's uptrend, hitting an intraday high of $81,270.50, breaking through the $81,000 mark for the first time since May. As of 7:37 PM, Bitcoin was trading at $79,000, up 1.14% in 24 hours. Data shows that Bitcoin surged approximately 23% last week, with an intraday high of $79,500 on Friday, marking its best weekly performance since March 2023. From Wednesday to Friday, total short liquidations across the market reached approximately $4.6 billion.
Meanwhile, weekly net inflows into U.S. spot BTC and ETH ETFs turned positive, shifting from -$400 million the previous week to $2.5 billion, the highest level this year. Lacie Zhang, head of the Bitget Wallet Research Institute, noted in an interview that Bitcoin's recent recovery is fundamentally a convergence of macro liquidity expectations, regulatory optimism, ETF capital flows, and short covering. Following the U.S. Treasury's expansion of its long-end bond buyback program, the market has re-priced liquidity improvement and a weaker dollar narrative, benefiting non-sovereign assets like gold and Bitcoin. Concurrently, progress on the U.S. crypto regulatory framework and friendlier policy signals from the White House have reduced uncertainty for institutional entry.
On the capital front, spot Bitcoin ETFs saw significant net inflows during the week, with daily inflows reaching approximately $600 million at one point. Combined with the heavy short positioning in the market, the price breakout above key levels triggered massive liquidations, further amplifying the upward slope. Yu Jianing, rotating chair of the Academic Committee of the Hong Kong Registered Digital Asset Analyst Association, told reporters that this recovery is the result of macro expectations, spot capital, and derivatives market dynamics working together. At the macro level, U.S. officials have begun focusing on long-end liquidity pressures, leading to a revaluation of scarce assets like gold and Bitcoin. Structurally, a large volume of forced buying amplified gains in a thinner liquidity environment, with options market makers' hedging demand creating a second wave of buying. On the capital side, U.S. spot Bitcoin ETFs saw net inflows of approximately $1.918 billion between August 17 and 21, while Bitcoin balances on exchanges decreased by about 17,300 coins during the same period, indicating genuine spot absorption in the latter part of the rally.
"Bitcoin's return to the $80,000 mark is driven by multiple factors," said Ding Yuan, dean of the Xinhuo Research Institute. Short covering acted as a direct catalyst; meanwhile, the decline in long-end U.S. Treasury yields has improved the macro liquidity environment, and expectations for institutional capital entry continue to heat up. Additionally, the U.S. SEC has unveiled a new crypto asset regulatory framework with a safe harbor mechanism, allowing projects to shed their security status after completing compliance governance. This significantly reduces compliance uncertainty for early-stage crypto projects. The string of favorable policy developments is attracting incremental capital to reassess risk pricing in the crypto space.
Bull Market Restart or a Temporary Short Squeeze?
Is this rebound a fleeting short squeeze or a genuine restart of the bull market? An anonymous Binance researcher told reporters, "Based on current market performance, it's not yet appropriate to simply label this rally as a 'bull market restart' or a 'temporary short squeeze.' Forced liquidations did amplify volatility in the short term, but unlike a pure short squeeze, this rally has been accompanied by actual inflows into spot ETFs. This suggests the price increase is not entirely leverage-driven but also supported by incremental buying. We lean toward viewing the recent movement as a process of market re-pricing under a new macro and capital environment."
Lacie Zhang also believes it is not a mere short-term squeeze, but it cannot be directly defined as a full bull market restart. A short squeeze explains why the rally was so fast, but it doesn't account for the more medium-term shifts like renewed ETF inflows, improving macro narratives, and declining policy risk premiums. A more accurate assessment is that the market has moved from a Bitcoin-led recovery phase to a stage of observing whether a new risk cycle can be initiated. If Bitcoin can hold the $78,000–$80,000 range, while ETFs continue to see net inflows, BTC dominance stops rising, and major assets like Ethereum strengthen relative to Bitcoin, the probability of a bull market restart increases significantly. Conversely, if capital remains concentrated solely in Bitcoin and ETF inflows cool rapidly, this move is more likely a staged pullback following a strong rebound.
Ding Yuan pointed out that relative to the previous cycle's high, the current price is still at a low level, presenting a high cost-performance ratio with significant upside potential. The regulatory environment, institutionalization, and infrastructure are all more mature than in the last cycle, yet the current price has not fully priced these factors in. In the short term, it is crucial to separate the "squeeze" from the "trend." This rapid ascent from lower levels has been partly driven by forced short covering, which tends to be swift; one cannot equate a squeeze with an established trend.
Yu Jianing stated that it is more appropriate to define the current situation as a strong rebound within a bear market. The squeeze served as the ignition mechanism, but a bull market restart lacks sufficient confirmation. On the data front, signals supporting a medium-term recovery have emerged: large capital is accumulating at lower levels, exchange balances are declining, and the MVRV-Z score remains in a relatively low range around 0.82, indicating that prices were indeed near a relative bottom. However, although the proportion of supply in profit across the network has risen from 50.5% to 68.4%, it still falls short of the approximately 75% expansion confirmation zone.
"The proportion of short-term holders in profit has temporarily exceeded 90%, while long-term holders continue to distribute, suggesting that profit-taking pressure is building after the rebound. If Bitcoin can maintain levels above $83,000–$85,000 for about two weeks, with profitable supply stabilizing above 75%, and ETF, stablecoin, and on-chain spot demand expanding simultaneously, the case for a bull market restart would become more convincing. Until these signals appear, it would be premature to confirm this as a new major upward wave," Yu Jianing noted.
Future Outlook Hinges on Persistence of Spot ETF Inflows
Judging from the market performance this week, the upward momentum driven purely by forced liquidations has noticeably diminished. Can Bitcoin sustain its gains? Lacie Zhang pointed out that the sustainability of the rally depends on whether spot buying can take over, with spot ETFs being the most critical indicator to watch. Bitcoin's short-term breakout above $80,000 doesn't necessarily require all conditions to align perfectly, but at least two of the following three factors need to be satisfied: sustained ETF inflows, a friendly macro environment, and continued improvement in regulatory expectations. If ETFs maintain net inflows and the price holds above $80,000, seeing $85,000 to $90,000 in the coming weeks is realistic. If ETF inflows accelerate while the U.S. dollar and Treasury yields weaken, the market could even briefly test $95,000 to $100,000. However, if ETF flows turn negative, contract funding rates become overheated, or Bitcoin fails to hold above $80,000, the market will likely need a pullback and consolidation before determining its next direction.
The Binance researcher mentioned above believes that the weakening of short-term trading momentum from forced liquidations does not mean the rally's logic has ended. Similarly, future market performance cannot be solely attributed to spot ETF inflows. For a more sustainable trend to form, it typically requires a combination of genuine spot demand, institutional participation, market liquidity, and a supportive overall macro environment. Spot ETF flows serve as an important gauge of institutional demand but are not the only factor determining price direction.
Yu Jianing emphasized that while spot ETFs are indeed the most critical variable for the coming period, the persistence and nature of ETF inflows are more important than single-day volumes. From August 17 to 21, U.S. spot Bitcoin ETFs recorded net inflows for five consecutive trading days, totaling approximately $1.918 billion, indicating that ETFs have taken over the baton in the latter half of the rally. However, on August 21, the single-day inflow dropped to $308 million from $606 million the previous day, and BlackRock's Bitcoin ETF (IBIT) accounted for about 69% of the week's increase, showing that capital sources remain concentrated. During the same period, the correlation coefficient between ETF inflows and CME position changes was approximately 0.40, with large inflow days often accompanied by rising futures positions. This suggests that some of the capital may be serving basis arbitrage strategies rather than representing long-term directional allocation.
"Therefore, the real things to watch going forward are whether ETFs can maintain net inflows for several consecutive weeks, whether capital sources diversify beyond IBIT to more products, whether CME positions gradually decouple from ETF flows, and whether exchange balances, spot trading volumes, and stablecoin supply improve in tandem. ETFs can sustain upward momentum, but they cannot restart a bull market alone. Only when spot demand expands from a single channel to diverse, sustainable capital flows will Bitcoin's price above $80,000 find more solid support," Yu Jianing said.
Ding Yuan believes that Bitcoin's next growth phase will depend on three forces: first, the reallocation demand from capital exiting the already overcrowded AI trade; second, structural capital demand driven by global regulatory dividends, including ETFs; and third, RWA tokenization, which is opening capital channels between cryptocurrencies and traditional stock and bond markets. RWA is not just a single theme but a bridge connecting the capital pools of two markets. In the short term, one must observe whether spot ETFs and institutional buying can take over from the squeeze momentum. In the medium term, the focus is on whether reallocation, regulatory dividends, and RWA capital inflows can advance in sync. If these three forces resonate, the current Bitcoin rally will transition from a squeeze phase to the starting point of a new cycle.