Bitcoin above $78,000 after reaching over three-month high

The crypto was flat at $78,740.1 by 22:06 GMT, briefly hitting a three-month high of $81,220.4

Bitcoin steadied above $78,000 after briefly hitting an over three-month high on Tuesday as growing uncertainty over U.S. fiscal health weighed on the dollar and spurred extended flows into cryptocurrencies.

The world’s largest crypto was flat at $78,740.1 by 22:06 GMT, briefly hitting a three-month high of $81,220.4. Bitcoin soared more than 22% last week, its best weekly showing since March 2023.

Bitcoin’s latest rally was fuelled chiefly by growing anxiety over U.S. fiscal health and the long-term outlook for the dollar.

Said anxiety was triggered last week by the U.S. Treasury unveiled plans to essentially double its pace of bond buybacks to help cap a surge in yields.

The move spurred concerns that the dollar may bear the brunt of the Treasury’s intervention in bond markets, sparking the so-called “debasement trade.”

The Treasury’s buyback announcement has shifted the market narrative from higher yields to USD debasement – fuelling a weaker USD, stronger gold and higher breakevens. While QE comparisons are overdone, rising policy uncertainty and questions around Fed independence are weighing on the USD, OCBC analysts said in a note.

This in turn saw investors pile into gold and cryptos– assets seen as mostly shielded from ructions in the bond market.

Bitcoin in particular benefited greatly from this notion, with the crypto’s dismal year-to-date performance also drawing in bargain buyers.

Data from Coinglass showed Bitcoin’s rebound liquidated more than $457 million in short positions over the past 24 hours.

The trend spilled over from last week, where billions in Bitcoin short positions were wiped out by the crypto’s abrupt rebound.