Dollar devaluation trade disrupts bear market clearing, surging 22.27% in a week: Has Bitcoin completed its cycle bottom? | Bitcoin | Research Report | Cryptocurrency Market Analysis | Bottoming Phase

As long-term US Treasury yields rise to multi-year highs, conflicts in the Strait of Hormuz remain unresolved in the short term, and the July FOMC minutes from the Federal Reserve signal a hawkish stance, global risk assets are under pressure again, with both bond and equity markets falling simultaneously. Meanwhile, gold and $Bitcoin (BTC.CC)$ have risen significantly, creating a rare divergence from global financial assets.

Bitcoin surged rapidly from around $63,000 to over $77,000 this week, briefly approaching $80,000, and reclaimed the 200-day moving average, a traditional bull-bear dividing line. After approximately six months of low volatility, deleveraging, and continuous clearing, the market faces a key question: Does this week's rally mean Bitcoin is ready to break out of the bottom, or is it merely a bear market rebound driven by macro liquidity, regulatory expectations, and a short squeeze?

Macro Finance

This week, the macro environment showed a divergence characterized by "basically stable liquidity" and "long-end interest rates continuing to suppress valuations." Using the common proxy metric of "Federal Reserve Balance Sheet minus TGA minus Overnight Reverse Repurchase Agreements," net liquidity in the U.S. financial system was approximately $5.81 trillion, rising slightly by about 0.17% week-over-week. The SOFR stood at 3.63%, up by only 1 basis point, indicating that short-end USD liquidity remains stable.

The real pressure stems from long-end interest rates. The FOMC minutes released on August 19 were markedly hawkish, with "many participants" suggesting that further policy tightening might still be necessary if inflation does not continue to decline. The yield on the 10-year U.S. Treasury note rose to around 4.74% on Friday, while the 30-year yield briefly hit 5.337% on August 18, reaching a new high since 2007.

The sell-off in long-dated bonds is no longer just a reflection of monetary policy expectations; the market has begun to simultaneously reprice U.S. fiscal deficits, long-term inflation, Treasury supply, and term premiums. As a result, equity markets faced significant pressure, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite falling approximately 1.43%, 0.85%, and 2.05%, respectively, this week.

What truly deserves attention is the policy response from the U.S. Treasury Department. On August 19, the Treasury announced it would increase the size of single-tap liquidity buyback operations for 10-20 year and 20-30 year Treasuries from a maximum of $2 billion to at least $4 billion, with the new arrangement effective from September 9. Although this week only saw the policy announcement rather than the implementation of new buyback volumes, the signaling effect was clear: following the rise in 30-year yields to near 20-year highs, the Treasury has begun to strengthen liquidity support for the long-end market.

Following the announcement, the 30-year yield briefly dropped to around 5.19% before rebounding to approximately 5.24%, with most of the decline quickly erased. This indicates that technical liquidity support has not altered the market's fundamental assessment of fiscal deficits, inflation, and term premiums.

Amidst this process, gold and Bitcoin rose by approximately 5% and 22%, respectively. Historically, rising U.S. Treasury yields have suppressed gold and Bitcoin; however, this week, despite long-end yields remaining elevated, both assets continued to climb. This suggests the market may be pricing in a new risk structure: when risks originate less from the private sector and more from government balance sheets and long-term currency value, capital may shift toward scarce assets outside the sovereign credit system—namely, gold and Bitcoin.

Gold represents a more mature expression of this logic, while Bitcoin serves as a high-beta version. Of course, Bitcoin's gains this week were also driven by improving U.S. regulatory expectations, ETF inflows, and short squeezes, so they cannot be simply attributed to "damaged USD credibility." More accurately, U.S. fiscal pressure and the potential risk of monetary dilution have begun to become one of the new sources of funding for Bitcoin, resonating with internal factors within the crypto market.

Crypto Markets

Bitcoin opened the week at approximately $63,019 and closed around $77,054, marking a weekly gain of 22.27%, with prices nearing $80,000 at the peak. The price consecutively broke through the 30-day, 90-day, and the 200-day moving average near $69,000, significantly improving the medium-to-long-term technical structure.

Trading volume in the spot market increased synchronously, with the 7-day average daily trading volume growing by over 100% compared to the previous week. Bitcoin spot ETFs saw net inflows of approximately $1.9 billion for the week, stablecoin supply increased by about $1.87 billion, and Bitcoin balances on centralized exchanges decreased by roughly 10,000 BTC, indicating that new buying power continues to absorb spot supply.

Derivatives further amplified the market move. Total open interest across the market rose to approximately $66.46 billion, an increase of about 8.1% for the week. Funding rates recovered, and billions of dollars worth of nominal short positions were liquidated as key resistance levels were breached, creating a distinct "short squeeze." Therefore, this week's rally was the result of combined forces: incremental spot capital, ETF inflows, stablecoin liquidity, and short squeezing.

However, on-chain liquidation has not ceased. Long-term holders are still using the rebound to reduce positions, with some loss-making筹码 being released at an accelerated pace as prices rise; short-term holders have shifted from previous stop-losses to taking profits. Notably, although BTC inflows to exchanges have increased significantly, the total exchange balance has still decreased by approximately 10,000 BTC. This indicates that the most important change in the current market is: while old holders are increasing supply, new buying power is temporarily stronger.

Based on this week's upward momentum and internal pressures, the market needs to be observed. If new buying power continues to absorb sell-offs from long-term holders, the bottom-supply-demand structure may truly reverse; if new capital rapidly diminishes, the accumulated selling pressure may once again dominate the market.

Market Implications

The correlated rise of gold and Bitcoin has sent an important signal—long-end US Treasuries are gradually transitioning from traditional risk-free assets to becoming a 'barometer' for US fiscal pressure and changes in term premiums.

As the 30-year yield rose to near 20-year highs and the Treasury subsequently announced an expansion of long-end repurchase arrangements, the market began to partially price in the following logic: if elevated long-term financing costs increasingly reflect issues with US fiscal sustainability, then investors' definition of 'safe assets' may change.

In the past, capital fled to US Treasuries during times of risk; but when the risk itself begins to stem from the government's balance sheet, some capital may shift toward non-sovereign scarce assets like gold and Bitcoin.

At this stage, we still view the framework of 'US fiscal pressure – potential currency dilution – non-sovereign scarce assets' as an emerging new macro trading narrative, rather than a fully validated long-term pricing mechanism.

What truly needs validation is whether this logic can continue to attract new capital independent of the crypto market's internal cycles. If the answer is yes, it could become the most significant structural change in the later stages of this bear market.

Outlook

Referencing historical cycles, Bitcoin has not yet confirmed that the crypto market has completed its full bear market clearance. However, according to the 'EMC Labs Cycle Analysis Model,' we have basically entered the 'bottom-grinding phase.' The biggest variable this week is that US fiscal pressure and the trading of 'non-sovereign scarce assets' have suddenly entered the existing crypto cycle structure. This has sharply increased the difficulty of forecasting future market trends, requiring close attention in the short term to:

First, continued observation of long-end US Treasuries and policy responses is needed. If long-term financing costs remain high, while the Treasury continuously strengthens debt management support and the Federal Reserve finds it difficult to enter a rate-hiking cycle, the market may further reinforce the expectation that 'fiscal pressure will ultimately need to be absorbed through looser financial conditions or currency dilution,' benefiting both gold and Bitcoin.

Second, continue to observe the balance of power between on-chain selling and new capital inflows. Currently, selling by long-term holders is still increasing, but new buying power is temporarily stronger. If selling gradually decreases in the future while ETFs, stablecoins, and macro capital continue to flow in, this rally may gradually evolve from a rebound into a trend reversal; otherwise, it may revert to a bear market rally.

Finally, keep an eye on two key price levels: the May rebound high near $83,000 on the upside, and the 200-day moving average around $69,000 on the downside. If Bitcoin finds stable support at the 200-day moving average after a pullback and challenges $83,000 again, the probability of a trend reversal will rise significantly. However, if it falls back below the 200-day moving average while ETF inflows weaken and long-term holders continue to expand their selling pressure, this week's market action may be redefined as a major bear market driven by macroeconomic events, new narratives, and short squeezes.

Therefore, we are not yet in a hurry to declare that the bear market is over, but we must acknowledge that a new variable has entered Bitcoin's pricing framework: previously, the market was dominated by internal crypto cleansing, but starting this week, U.S. fiscal pressures and long-term concerns about the dollar's creditworthiness have become critical factors that must be incorporated into cycle analysis.

The above analysis is provided by EMC Labs.

———————————————————————

About EMC Labs

EMC Labs is a strategic partner of Victory Securities. Together, they have launched the Victory EMC BTC Cycle Fund—the only virtual asset fund approved by the securities regulator that accepts stablecoin subscriptions. EMC Labs was co-founded by seasoned digital asset investors and data scientists, with a core team drawn from JD.com Financial, Bell Labs, Marsbit, and other institutions. EMC Labs has invested significant resources in building a proprietary engine to analyze Bitcoin on-chain data and technical indicators.

Disclaimer

Investing involves risks. Investors should note that the value of securities and investments may go up or down and cannot be guaranteed. Investors may not recover their original investment amount, and past performance is not indicative of future results. Securities trading services are provided by Victory Securities Limited (hereinafter referred to as 'Victory Securities'). This document has been prepared and authorized for publication on this platform by Victory Securities Limited solely for reference purposes. Victory Securities Limited reserves the right to amend or terminate this document at any time without prior notice. All information on this platform may not be reproduced, linked, reposted, or otherwise copied or used for commercial purposes by any media outlet, website, or individual without the prior written authorization of Victory Securities. Authorized users must clearly attribute the source of this document to Victory Securities and agree to comply with applicable laws and international internet usage conventions, refraining from any illegal use of this document. Unauthorized or unlawful use will result in full legal and financial liability. Data or information referenced in this document may be sourced from third parties; Victory Securities does not assume responsibility for the accuracy of such third-party data. Victory Securities makes no express or implied representations, warranties, guarantees, or undertakings regarding the fairness, accuracy, timeliness, completeness, or correctness of any information, forecasts, or opinions contained herein, or the assumptions underlying them. Any forward-looking statements included herein should not be construed as guarantees of future performance, and actual outcomes may differ materially from such statements. This document does not constitute, and should not be construed as, an offer, solicitation, invitation, recommendation, or advice to buy or sell any investment product, nor should it be regarded as a basis for making investment decisions or as professional advice. Readers should fully understand the associated risks, as well as the relevant legal, tax, and accounting implications and consequences, before making any investment decision, and should determine whether an investment aligns with their personal objectives and risk tolerance, seeking professional advice where necessary. In certain jurisdictions, the distribution or dissemination of this document may be restricted by law or regulation; recipients are responsible for complying with any such restrictions.

33K Views