Bitcoin has recovered above $79,000 after briefly falling toward $78,200 as President Donald Trump threatened 50% tariffs on Canadian vehicles, automotive parts and steel from January 2027. According to Truth Social, Trump announced the tariff increase would apply to all Canadian cars, trucks, automotive parts and steel, with the message reading "Build in the U.S. and there are ZERO TARIFFS." The cryptocurrency initially moved lower but buyers soon absorbed the decline, helping BTC return above the psychological $79,000 level. At the time of writing, Bitcoin traded near $79,300, up more than 2% over the previous 24 hours, coming within roughly $500 of the $80,000 level after reaching an intraday high close to $79,900. The limited reaction contrasts with Bitcoin's behavior during earlier tariff disputes, when BTC lost the $65,000 support level as new U.S. global duties approached in February, while the total crypto market value fell as traders reduced exposure to risk assets.
The rally has been powered by an unprecedented short squeeze that forced traders to close positions at a massive scale. According to CoinGlass data, the crypto market witnessed $2.739 billion in short liquidations on August 19th, followed by another $1.265 billion liquidation wave on August 21st, marking the two biggest short liquidations in 2026. The RSI on the 4-hour timeframe was extremely overbought, reaching historical extremes for a sustained period. Analyst Boris noted that cumulative short liquidations measured $7.739 billion, overtaking the $7.582 billion for longs, representing the first such overtake since the October 2025 short squeeze that pushed Bitcoin prices to an all-time high. Veteran trader Killa explained that short positions have been completely obliterated, an outcome that generally doesn't accompany bear market conditions, suggesting this marks a trend transition rather than a controlled bounce designed to protect short exposure.
The rally gained significant momentum when US Treasury Secretary Scott Bessent announced Wednesday the department would at least double the size of its long-dated bond buybacks, increasing purchases from $2 billion per operation to $4 billion for 10-to-20-year and 20-to-30-year maturity ranges. The revised program will also increase the number of long-end operations from two to four per quarter through November 4, with no money deployed under the expanded schedule yet. The announcement prompted a rapid repricing in the bond market, with the 30-year Treasury yield falling from a 19-year high of about 5.34% to 5.19%, while the 10-year yield declined to around 4.65%. Bitcoin jumped 8.2% from an intraday low near $64,100 to $69,500 in less than 12 hours after the Treasury disclosed the change, with about $1.44 billion in short positions liquidated across major crypto exchanges during the move, including $1.29 billion within one hour. The buyback program does not amount to Federal Reserve quantitative easing, as the Treasury purchases older and less liquid bonds using proceeds from newly issued debt.
Crypto ETFs recorded approximately $1.92 billion in weekly net inflows during the latest five-session rally, marking a sharp return of institutional demand after funds struggled to attract consistent capital earlier in the year. On August 20 alone, the funds recorded about $606 million in net inflows after drawing roughly $517 million during the previous session, with BlackRock's IBIT accounting for a large portion of the demand. The combined assets held by U.S. spot Bitcoin ETFs rose above $90 billion during the rally. US spot Bitcoin ETFs recorded five consecutive trading days of inflows during the week, with the approximately $1.92 billion total providing evidence of genuine investor demand, as per Xapo Bank's Gadi Chait. Justin d'Anethan of Arctic Digital noted that "In the case of Bitcoin, with pent-up demand and a multi-month underperformance, the trade wrote itself and algos along with sophisticated trading firms and asset managers piled back in."
Bitcoin's immediate challenge is holding the area around $77,000 to $80,000 after reaching its three-month high, with a sustained break above $80,000 supporting Jeff Mei's $80,000-$90,000 scenario. Justin d'Anethan of Arctic Digital observed that bullish engulfing patterns had appeared on Bitcoin's daily and weekly charts, while a similar monthly signal was developing but had not yet been confirmed by the candle's close. The patterns followed an extended period in which several momentum indicators remained in oversold territory, with their recovery potentially supporting a longer-term reversal, though the speed of the recent rally increases the possibility of consolidation or profit-taking. Jamie Coutts of Helios Analytics notes there is "a wall of overhead supply at the low $80k range it needs to work through," while on-chain data shows spot and futures demand positive together for the first time since October 2025. Large holders of Bitcoin whales recently added roughly $2.75 billion worth of the token in 60 days, according to CryptoQuant, with the mid-$60,000 range potentially becoming a broader accumulation area if Bitcoin fails to hold $70,000.
