Bitcoin rebounded sharply from weeks of low volatility and tight range-bound trading as institutional demand for the asset picked up.
The cryptocurrency was recently 8.1% higher on Friday at around $78,530, returning above $78,000 for the first time since late May, according to LSEG data.
The sharp gains come as a combination of catalysts converge. According to Zaye Capital Markets' Naeem Aslam, a jump in institutional spot demand, coupled with rising expectations of lower Treasury yields and forced buying from certain traders to close their losing bets have triggered the rally.
According to Zaye Capital, U.S. spot bitcoin products attracted almost $520 million in net inflows on Wednesday, marking their largest daily inflow in about three and a half months.
Moreover, U.S. President Trump's call for lawmakers to pass a "fair version" of the proposed Clarity Act regulating digital assets, which is currently under consideration in Congress and has been championed by Wall Street and crypto groups, signals the U.S. government is open to accumulating additional bitcoin and other digital assets if regulators approve, Aslam said.
"[The Trump administration's stance] materially changes the regulatory risk premium surrounding bitcoin because clearer rules can make banks, asset managers and corporations more comfortable allocating capital to the sector," he added.
Traders are also reassessing the broader macro environment, which is becoming more constructive to bitcoin.
Thursday's U.S. economic data, including falling jobless claims, stronger manufacturing activity and a stable outlook for business inflation over the year ahead, point to resilient economic growth without signs of a fresh inflation surge.
"For bitcoin, that macro mix is important because it supports the possibility of easing financial conditions without signaling an outright economic downturn," Zaye Capital Markets said.
News that U.S. government debt has reached $40 trillion also contributed to the rally, as investors grow increasingly concerned that higher debt-servicing costs could ultimately put pressure on the dollar and force policymakers to pursue looser monetary policy, said Matthew Sigel, head of digital assets research at VanEck.
The prospect of a weakening dollar is pushing bitcoin higher, as investors start to see the cryptocurrency as one of the best dollar hedge, Sigel added.
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