Bitcoin saw a clear upward trend last week, with its price rising by about 22% within a week. This round of gains was initially driven more by changes in macro liquidity. After the U.S. Treasury Department announced an expansion of long-term Treasury bond repurchases, yields on long-term U.S. bonds fell, the dollar weakened, and both gold and Bitcoin strengthened simultaneously.

Sygnum, the Chief Investment Officer, Fabian Dori and DWF Labs, the Head of Market Research, Martin Lee stated that this round of gains did not entirely come from internal buying in the crypto market. The initial momentum was more like macro trading, followed by a gradual accumulation of ETF capital flows and the demand from the crypto market itself.

The Ministry of Finance's repurchase first boosted sentiment.

On August 19, the U.S. Treasury Department stated that it would at least double the maximum scale of liquidity support repurchases for 10- to 20-year and 20- to 30-year nominal government bonds, increasing the size of each operation from $2 billion to at least $4 billion. The new arrangement will take effect on September 9 and will continue until the end of this refinancing quarter.

Dori believes that this statement has temporarily depressed long-term yields and has also reignited market concerns about currency devaluation. Against this backdrop, the flow of funds towards 'hard assets' such as gold and Bitcoin indicates that Bitcoin's first round of gains has distinct macroeconomic characteristics.

Martin Lee also mentioned that technology and AI assets were still under pressure at that time, but gold and Bitcoin ETF saw inflows of funds, indicating that the market's risk appetite had not fully recovered, but rather tended towards transactions aimed at hedging against the decline in purchasing power of currencies.

ETF and short covering work together to drive the market

In addition to macroeconomic factors, derivatives data also indicate that this round of gains was accompanied by a significant covering of short positions. Lee shows that after Bitcoin broke through its previous range of fluctuations, approximately $2.7 billion in short positions in the crypto market were liquidated, and some of the so-called buying orders actually came from short sellers who were forced to cover their positions.

Dori also pointed out that the open interest of futures denominated in Bitcoin actually decreased during the upward trend, while the funding rate remained moderate. This is typically not consistent with the characteristics of high-leverage long positions; it seems more likely that passive short liquidations drove the price up rapidly.

• Spot Bitcoin ETF Breaks Through with a Net Inflow of Approximately $1.92 Billion This Week
• As of last Wednesday, ETF has had a net inflow for 8 consecutive trading days.
• These 8 trading days have attracted a total of approximately $2.8 billion in funds.

Analysts believe that the continuous inflow of ETF is very important, as the initial reaction of the bond market to the Ministry of Finance's announcements has already weakened. If long-term yields return to pre-announcement levels, Bitcoin will need even more support from the buy orders within the crypto market itself to maintain its high levels in the future.

September 9th becomes the next observation point.

The next key time point for the market to pay attention to is September 9th, when the Ministry of Finance officially launches an expanded repurchase program. Dori believes that the market usually reacts to policy expectations before the actual implementation, so what really matters is whether liquidity will continue to support risky assets after these expectations are digested.

He mentioned that if the long-term yield rises again, it indicates that buybacks have not been able to continuously suppress financing costs; if the U.S. Treasury's general account is re-established, it could also draw liquidity from the market. At the same time, if funding rates and open interest contracts rise rapidly, it suggests that leveraged funds may once again dominate the trend of Bitcoin.

The observation indicators provided by Lee are more straightforward and mainly include three items.

• Has the cash flow of spot Bitcoin ETF weakened?
• Relative Changes in the Three-Month Futures Basis and U.S. Treasury Yield
• Has Bitcoin fallen back below the range before the breakout?

Overall, this round of gains has shifted from mere macroeconomic stimulus to testing whether real demand can take over. Next, the subscription activities of ETF, changes in derivatives leverage, and the liquidity environment of the US dollar will become the main indicators to determine whether Bitcoin can continue its upward trend.