Bitcoin hit $80,000 for the first time since May, reversing months of subdued valuations as fresh investor interest in the so-called debasement trade brought growing support for the cryptocurrency as a dollar hedge.
The digital currency climbed nearly 3% in early Asian trading on Tuesday to about $81,238, a level last reached on May 15. The gains extend a weeklong rally that has lifted bitcoin about 25%.
The asset was recently 1.7% higher at around $80,280, according to LSEG.
Analysts pointed to a confluence of bullish factors behind bitcoin's sharp rise.
Bitcoin's rally came after U.S. Treasury Secretary Scott Bessent said last week that the U.S. would expand its bond buybacks, seen as an effort to lower long-term yields.
The announcement triggered another round of dollar selling, with Bridgewater Associates founder Ray Dalio recommending in a blog post Friday that investors hold more bitcoin as a hedge against the risk of a looming debt crisis.
"The dollar debasement narrative is back after the Treasury's latest buyback announcement," said Glassnode Research analysts.
Bitcoin's support also reflects broader unease over the direction of U.S. economic policymaking as the lines between monetary and fiscal policy blur, following Bessent's interventions and Fed Chair Kevin Warsh's push to end the central bank's practice of forward guidance, DBS analysts said.
Amplifying the recent gains was a short squeeze, as traders who had bet on bitcoin's decline were forced to buy back their positions as prices surged. According to Bitfinex analysts, around $3 billion of short positions were liquidated over two days.
Meanwhile, trading activity in spot bitcoin exchange-traded funds has recovered strongly, with more than $500 million in inflows on Aug. 21 signaling a revival in institutional demand for the risk asset.
The broader crypto complex also logged gains. Ethereum, the second most-traded cryptocurrency, was recently 0.7% higher at around $2,490, while XRP jumped 2.2% to $1.51.
Traders are becoming broadly more optimistic about cryptocurrencies after U.S. President Trump met with crypto executives at the White House and called on Congress to move quickly on the pro-crypto Clarity Act, which has been under consideration for the past year. The message signaled that the Trump administration remains supportive of cryptocurrencies and committed to a more relaxed regulatory approach, said Vladimir Tikhomirov, co-founder of Algebra Finance.
However, whether the crypto rally will last remains uncertain, with much depending on tangible regulatory progress following Trump's remarks, analysts say.
"The current optimism could bleed out just as quickly as it appeared," Tikhomirov said.
