Bitcoin traded near $72,000 on August 20, capping a two-day rally that wiped out more than $3.1 billion in crypto short positions. The move follows a US Treasury liquidity decision that changed sentiment across risk assets this week.

Data from CoinGlass shows short liquidations across crypto markets hit $3.1 billion between August 19 and 20. Thursday's total was the largest single-day short wipeout ever recorded. Bitcoin accounted for $1.65 billion of that figure, just over half the total.

Bitcoin traded at $71,924 at the time of writing, up over 11% on the day, after touching local highs of $71,992 on Bitstamp. That puts the price at levels not seen since early June. Ether, Solana, and XRP posted double-digit gains alongside it, with HYPE up more than 22%.

Counted in dollar terms rather than just short positions, CoinMarketCap places Thursday's combined long and short liquidations at $3.25 billion, ranking it seventh among the largest liquidation days on record. It remains far smaller than the $20 billion long liquidation cascade that followed Bitcoin's drop from its October 2025 all-time high of $126,200.

What Triggered The Rally

The rally traces back to a Treasury announcement on August 19. The department said it would at least double the size of its debt buyback operations, from $2 billion to a minimum of $4 billion per operation, starting September 9.

Debt buybacks add the government as a buyer in longer-term bond markets. The news pushed the 30-year Treasury yield down 9 basis points to 5.19%, after the yield had hit a near 20-year high just a day earlier. Bitcoin jumped 6% on the news, breaking above $69,700 for the first time since June.

Analysts framed the buyback as a technical maneuver rather than debt reduction. One Point BFG Wealth Partners CIO Peter Boockvar called it a rearrangement of the Treasury's maturity schedule, not a paydown. The announcement landed as US national debt closes in on $40 trillion, with interest payments reaching $1.4 trillion over the past year, three times the 2020 level.

Markets read the buyback as a liquidity signal similar to past instances when central bank or government intervention lifted asset prices. Stocks rallied alongside Bitcoin on the news.

Short Sellers Caught Off Guard

The scale of the short liquidations shows how many traders had positioned for Bitcoin to keep falling. Prices had been under pressure for weeks following the October 2025 peak, and bearish positioning had built up as a result. When Bitcoin reversed sharply, those short positions were forced to close, adding fuel to the price move.

This dynamic, often called a short squeeze, tends to accelerate price moves in both directions. Forced buybacks from short sellers closing losing positions add real buying pressure on top of organic demand, which can push prices further than fundamentals alone would justify.

Bitcoin Holders Take Profit After Months Underwater

The rally also gave short-term Bitcoin holders a chance to exit positions that had been losing money for weeks. According to CryptoQuant, wallets holding Bitcoin for less than 155 days sent a record 43,300 BTC to exchanges in profit on Thursday, the largest such move of 2026.

The Spent Output Profit Ratio for this cohort reached 1.01, its highest reading since April. A ratio above 1 means most coins moved at a profit relative to their last transaction, a reversal after a stretch where many short-term holders sat on unrealized losses.

Cointelegraph had previously reported that this cohort's average cost basis sat around $68,700. Analysts had warned that a large block of investors near breakeven could cap any recovery, as holders would rush to sell once they returned to profit. Thursday's price action pushed Bitcoin well past that level, giving those holders room to exit.

What This Means Going Forward

The combination of a short squeeze and profit-taking from short-term holders explains most of the price action, but it does not resolve an underlying liquidity concern flagged by Bitfinex earlier this week. Stablecoin supply on exchanges has fallen by $14 billion since May, and the Stablecoin Supply Ratio has climbed from 9.82 to 11.69 since June 30.

A high SSR reading means less stablecoin cash is sitting on exchanges ready to buy. Bitfinex noted that without a turn in stablecoin supply, rallies risk running on thin liquidity rather than fresh capital. That leaves open the question of whether the current move has momentum behind it or reflects a short-term unwind of bearish bets.

Standard Chartered has pointed to $100,000 as a potential target if the Treasury's buyback program continues to support risk assets. Whether Bitcoin holds above $70,000 in the coming days will depend largely on whether new demand shows up to replace the short covering that has driven this week's gains.