Bitcoin remained above $78,000 on Tuesday after briefly reaching its highest level in more than three months, as growing concerns over U.S. fiscal stability weighed on the dollar and supported demand for cryptocurrencies.
The world’s largest cryptocurrency edged 0.1% higher to around $78,645 by 09:29 ET, after briefly touching a three-month high of $81,300.
Bitcoin Extends Its Recent Rally
Bitcoin was on track to post gains in eight of the previous nine trading sessions following a strong rebound over the past week.
The rally has been supported by renewed buying interest as well as short covering. Bitcoin’s rapid recovery forced a large number of traders betting against the cryptocurrency to close their positions.
This added further momentum to the recent move higher.
U.S. Treasury Plans Fuel Debasement Concerns
A major driver behind Bitcoin’s latest rally has been growing concern about the outlook for U.S. government finances and the dollar.
Last week, the U.S. Treasury announced plans to roughly double the pace of its government bond buybacks in an effort to ease pressure on Treasury yields.
The announcement raised concerns that increased intervention in the bond market could ultimately weaken the purchasing power of the U.S. dollar.
This has revived interest in the so-called debasement trade, where investors seek assets that may preserve value if confidence in fiat currencies declines.
Weaker Dollar Supports Bitcoin and Gold
OCBC analysts said the Treasury’s bond-buyback announcement has shifted the market narrative away from rising yields and toward concerns about potential dollar debasement.
Although comparisons with large-scale quantitative easing may be excessive, uncertainty surrounding fiscal policy and questions over Federal Reserve independence have added pressure on the greenback.
That environment has encouraged investors to increase exposure to assets such as Bitcoin and gold, which are often viewed as alternatives during periods of currency and bond-market uncertainty.
Bitcoin has also attracted bargain buyers following its relatively weak performance earlier in the year.
Bitcoin Rally Triggers $457 Million in Short Liquidations
Bitcoin’s sharp rebound has created significant losses for traders holding bearish positions.
According to Coinglass data, more than $457 million in Bitcoin short positions were liquidated over the previous 24 hours.
The trend follows substantial liquidations last week, when billions of dollars worth of short positions were reportedly forced out as Bitcoin rebounded rapidly.
Such liquidations can accelerate upward price moves because traders must buy Bitcoin to close their short positions.
Ether Shorts Also Face Heavy Liquidations
The broader crypto market experienced similar pressure on bearish traders.
Coinglass data showed approximately $112.3 million in Ether short positions were liquidated during the previous 24 hours.
The widespread short covering highlights how quickly sentiment across digital assets has shifted following the latest crypto market rebound.
Altcoins Pull Back After Recent Gains
While Bitcoin held near recent highs, several major altcoins traded lower on Tuesday after posting strong gains in previous sessions.
Ether fell around 1.2% to $2,463, while XRP declined approximately 2.6%.
Solana moved against the broader trend, rising around 2.3%.
Cardano fell roughly 3%, while BNB was little changed.
Memecoins Come Under Pressure
Major memecoins also weakened during the session.
Dogecoin dropped approximately 2.3%, while the TRUMP token fell around 7.5%.
The declines suggest that some traders were taking profits following the broader crypto market’s recent rally.
Bitcoin Investors Watch Dollar and Fiscal Risks
Bitcoin’s ability to hold above $78,000 suggests that investor appetite remains relatively strong despite modest weakness across other cryptocurrencies.
The combination of U.S. fiscal concerns, dollar weakness, Treasury bond-buyback plans and significant short liquidations has helped drive Bitcoin sharply higher.
Traders will now be watching whether the cryptocurrency can maintain momentum near its recent three-month high or whether profit-taking leads to a period of consolidation.
