Key facts
- Bitcoin price reached a peak of $78,543.79 before pulling back to the $76,000 area.
- US Treasury doubled long-term bond buybacks, contributing to a rally and weakening the dollar.
- Spot Bitcoin ETFs experienced over $1 billion in net inflows over three days.
- Over $4 billion in Bitcoin short positions were liquidated, marking a record short squeeze.
- US PCE inflation data is expected to show a cooling trend, with annual PCE at 2.8% and Core PCE at 3.3%.
Bitcoin's price experienced a significant surge, reaching $78,543.79 with a market cap of $1.543 trillion and a daily trading volume of $63.312 billion. This rally was partly fueled by the US Treasury doubling its long-term bond buybacks, an action viewed as an 'Operation Twist' style liquidity injection that weakened the dollar and boosted risk-on sentiment. Spot Bitcoin ETFs also saw substantial inflows, exceeding $1 billion over three days, with BlackRock being a leading participant. The surge also included a record short squeeze, liquidating over $4 billion in short positions.
However, the Bitcoin price later retreated towards the $76,000 area as traders anticipated key US economic data, including Personal Consumption Expenditures (PCE) inflation, Gross Domestic Product (GDP), and jobs figures. The PCE inflation for November is expected to show a cooling trend, with annual PCE projected at 2.8% and Core PCE at 3.3%, the latter being the Fed's preferred inflation gauge and its lowest since 2021. These expectations align with recent projections from Fed Chair Jerome Powell, who indicated three rate cuts in 2024, with the market assigning a 71% probability to a 25 basis point cut in March.
Macroeconomic factors such as the dovish monetary policy outlook, a steady US Dollar Index (DXY) around 101.8, and falling US 10-year Treasury yields below 4% (currently at 3.89%) have supported the crypto market recovery. Traders are also considering the potential approval of spot Bitcoin ETFs and the upcoming Bitcoin halving as catalysts for a bullish rally. Despite the positive sentiment, there is potential for profit-taking due to Friday's options expiry, with significant volumes of Bitcoin and Ethereum options set to expire.