Bitcoin nears $80,000 as U.S. Treasury bond buybacks boost liquidity and ETF flows rebound

Bitcoin rallies close to $80,000 amid liquidity boost

Bitcoin surged toward $80,000 this week, reaching as high as $79,500 before settling near $78,000. Analysts at research firm Bernstein attribute the rally to increased liquidity in financial markets, driven by the U.S. Treasury’s decision to expand buybacks of longer-dated government bonds.

The Treasury announced it would at least double the size of its liquidity-support buybacks for longer-dated bonds to $4 billion per operation by September 9. Bernstein analysts noted that bitcoin has historically responded positively to such liquidity expansions.

Key factors behind the rally

• The U.S. Treasury will increase bond buybacks to $4 billion per operation by September 9, improving market liquidity.
• Spot bitcoin ETFs saw net inflows of $1.6 billion this week, reversing earlier outflows.
• BlackRock’s IBIT fund led inflows with $503 million added on Thursday.
• Strategy, a company holding large bitcoin reserves, has stabilized its holdings after minor sales.

What Bernstein analysts say about the rally

Bernstein analysts, led by Gautam Chhugani, stated in a client note that bitcoin’s rally reflects a shift in market momentum. They explained that tighter financial conditions earlier this year, influenced by geopolitical tensions and capital shifts toward AI and semiconductors, had weighed on crypto markets. However, as AI spending increasingly relies on debt markets, additional liquidity could flow into bitcoin and other hard assets as a hedge.

The analysts also highlighted that while they are not macroeconomic experts, bitcoin has historically benefited from liquidity expansion.

ETF flows rebound after months of outflows

Spot bitcoin ETFs experienced significant outflows in May and June, totaling roughly $7 billion, or about 10% of their assets under management. This trend reversed this week, with net inflows reaching $1.6 billion, pushing combined assets above $85 billion from around $70 billion in June.

BlackRock’s IBIT fund was the largest contributor to Thursday’s inflows, adding $503 million. The rebound in ETF demand coincides with bitcoin’s price recovery.

Strategy’s bitcoin holdings stabilize

Strategy, a company known for holding large amounts of bitcoin, sold only about 0.8% of its bitcoin holdings in recent weeks to support dividend payments and stock buybacks. According to Bernstein, Strategy’s cash reserves now cover 2.8 years of dividends, and the company is expected to resume bitcoin purchases as its preferred stock, STRC, approaches its $100 nominal value.

Strategy currently holds 840,447 bitcoin, purchased at an average price of $75,385. With bitcoin trading near $78,000, the company’s holdings are now profitable, with an unrealized gain of over $2 billion.

Regulatory developments may support crypto markets

Bernstein analysts also pointed to regulatory developments as a potential support for crypto markets. They expect greater regulatory clarity, whether or not the Clarity Act—a landmark crypto bill—passes its procedural vote on September 15.

The analysts anticipate accelerated rulemaking by the SEC and CFTC in areas such as crypto issuance, tokenized equities, perpetual futures, and prediction markets, regardless of the bill’s outcome.

Ethereum outperforms bitcoin in recent rally

Ethereum has outperformed bitcoin during the latest rebound. Bernstein analysts attribute this to Ethereum’s greater exposure to stablecoins, tokenization, and real-world asset adoption.

What is confirmed

• The U.S. Treasury will increase bond buybacks to $4 billion per operation by September 9.
• Bitcoin reached a high of $79,500 before pulling back to around $78,000.
• Spot bitcoin ETFs saw net inflows of $1.6 billion this week, including $606.3 million on Thursday.
• BlackRock’s IBIT fund added $503 million on Thursday.
• Strategy holds 840,447 bitcoin, purchased at an average price of $75,385.

What is still unclear

• Whether the Clarity Act will pass its procedural vote on September 15.
• The exact impact of AI spending on debt markets and crypto liquidity in the long term.
• How regulatory developments will unfold if the Clarity Act does not pass.

Why this matters for crypto markets

The recent rally in bitcoin and other cryptocurrencies suggests a potential shift in market momentum. Increased liquidity from U.S. Treasury bond buybacks and renewed demand for spot bitcoin ETFs could signal a broader recovery in crypto markets. Additionally, regulatory clarity may reduce uncertainty for investors and companies in the space.

For Strategy, the stabilization of its bitcoin holdings and return to profitability could encourage further investment in bitcoin, reinforcing its position as a major corporate holder of the cryptocurrency.

Sources

• The Block