Bitcoin Rally Gains Steam as Fiscal Fears Fuel Debasement Trade

Bitcoin is rallying again as bond market moves revive fears of mounting fiscal strains, giving bulls fresh macro ammunition just when bearish bets were stretched. Treasury Secretary Scott Bessent's plan to at least double long-dated Treasury buybacks initially pulled yields lower and weakened the dollar while gold surged, rekindling the so-called debasement trade.

That trade argues that scarce assets outside the government monetary system become more attractive as fiscal pressures and easier financial conditions build. For Bitcoin, it was a powerful spark after months of tenuous rallies.

Momentum Returns to Crypto Markets

Rocket-ship emojis returned to X, bear-market obituaries resurfaced, and Michael Saylor posted an AI-generated nightclub meme urging followers to "buy Bitcoin, hold 10 years, ignore the noise, survive the fears." Even Ray Dalio, hardly a crypto evangelist, touted Bitcoin, citing an "unsustainable" debt spiral.

"It's very nice to see some signs of life in the crypto market. And this rally feels different from other tenuous sparks over the past few months," said Noelle Acheson, author of the "Crypto Is Macro Now" newsletter.

The policy backdrop helped too. President Donald Trump again pressed Congress to pass the Clarity Act, reinforcing an administration stance broadly supportive of digital assets.

"The regulatory risk premium is being repriced lower after Trump again urged Congress to pass crypto market structure legislation, which matters because clearer rules make it easier for institutions to underwrite exposure," said Lacie Zhang, research analyst at Bitget Wallet.

Technical and Flow Signals Turn Positive

The rise was so swift that Bitcoin broke above its 100- and 200-day moving averages, widely watched technical gauges, while its 14-day relative strength index pushed into overbought territory. A record wave of bearish bets was wiped out, spot-trading volumes jumped, and Bitcoin ETFs drew fresh inflows.

Over at Standard Chartered, Geoffrey Kendrick sees scope for the rally to feed on itself. He pointed to record short liquidations in data going back to 2021 and more than $1 billion of weekly spot-Bitcoin ETF inflows, arguing that stronger prices could attract further flows and eventually draw leveraged traders back into the market.

"For the first time this year there is now a risk my end-year forecast (of USD100k) is too low," he wrote in a note. "Once investors remember how quickly prices can accelerate to the topside, and we get past the 6 October date (12 months after the all-time high) an overshoot towards the all-time high (USD126k) before year-end may be possible."

Fresh Demand Still Needed

But one big week does not prove the flywheel is running again. The world's largest cryptocurrency has merely clawed back to levels last seen in May and remains roughly 43% below its October record, still well short of establishing a new trading range.

Much of the initial surge came from forced short covering, many ETF investors are still underwater, and the digital-asset treasury companies that helped amplify earlier rallies remain diminished. Bitcoin has also staged rebounds this year that fizzled when fresh buyers failed to follow.

"There are some encouraging signs: as prices continued higher, we saw fresh buying come into the market rather than traders simply closing short positions," said Tanay Ved, senior analyst at Talos. Establishing a new trading range will require something the squeeze alone cannot provide: sustained demand.