Bitcoin surge toward $80K points to liquidity-driven momentum shift as ETF flows rebound: Bernstein

Bitcoin's rebound over the past two days could mark a broader shift in market momentum amid improving liquidity conditions, renewed exchange-traded fund demand, and a more supportive U.S. regulatory backdrop, according to analysts at research and brokerage firm Bernstein.

Bitcoin rose as high as $79,500 at one point on Friday before pulling back to around $78,000, extending a rally that the Bernstein analysts linked to the U.S. Treasury's intervention in longer-dated government bonds. The Treasury said it would at least double the size of liquidity-support buybacks for longer-dated Treasuries to $4 billion per operation by Sept. 9 after a surge in long-term yields.

"We are not macro experts, but we do know bitcoin historically has had a positive reaction to liquidity expansion," the analysts led by Gautam Chhugani wrote in a note to clients on Friday. They argued that the weaker crypto market this year had partly reflected tighter financial conditions following the Iran conflict and an AI and semiconductor trade that pulled away substantial investor capital. However, as AI spending increasingly taps debt markets, Bernstein said additional liquidity could find its way into bitcoin and other hard assets as a hedge.

Bitcoin ETF flows rebound

The resurgence in price comes alongside a turnaround in spot bitcoin ETF flows. Outflows peaked at roughly $7 billion across May and June, equivalent to about 10% of assets under management, Bernstein noted. However, the funds subsequently attracted $1.6 billion in net inflows this week, including $606.3 million worth of inflows on Thursday, pushing combined assets above $85 billion from around $70 billion in June. BlackRock led yesterday's flows with $503 million added to its IBIT fund, according to data compiled by The Block.

Strategy's balance sheet has also stabilized following a period of pressure, the analysts said. Strategy sold only around 0.8% of its bitcoin holdings in recent weeks as it sought to bolster dividend cash reserves and support buybacks of its STRC preferred stock, according to the report. Bernstein said Strategy's cash reserves now cover 2.8 years of dividends and expects the firm to resume bitcoin purchases as STRC moves back toward its $100 nominal value. Strategy currently holds 840,447 BTC, bought at an average purchase price of $75,385, putting the position back in the black with an unrealized profit of over $2 billion as bitcoin trades near $78,000, according to The Block's BTC price page.

Bernstein also highlighted regulatory developments as another potential source of support for the broader crypto market, arguing that greater certainty is likely with or without passage of the landmark crypto bill, the Clarity Act, which is due for a Sept. 15 procedural vote.

The analysts expect accelerated SEC and CFTC rulemaking around areas including native crypto issuance, tokenized equities, perpetual futures, compute derivatives, and prediction markets regardless.

Meanwhile, ether has outperformed bitcoin during the latest rebound, which the Bernstein analysts attributed to ETH's greater exposure to stablecoins, tokenization, and real-world asset adoption.