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What a week for bitcoin.
After spending most of the summer going nowhere (and giving the crypto bears plenty to celebrate), bitcoin suddenly came roaring back to life.
The world’s largest cryptocurrency surged more than 20% last week, briefly approaching $80,000 on Friday. It was bitcoin’s best week in more than two years and lifted the price nearly 30% from its recent low around $60,000.
For longtime bitcoin investors, these kinds of moves aren’t exactly new.
I’ve been following bitcoin for well over a decade. In fact, I remember going on Fox Business years ago and recommending it when the price was around $600.
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You can imagine some of the looks I got.
Back then, bitcoin was still viewed by most of Wall Street as a strange internet currency used by computer geeks and speculators.
There were no spot bitcoin ETFs. BlackRock wasn’t involved. Major banks weren’t building crypto businesses. And the idea of the U.S. government creating a strategic bitcoin reserve would have sounded crazy.
A lot has changed since then.
And while I’m certainly not expecting another 100X return from here, I believe last week’s move is worth paying attention to.
There wasn’t one catalyst behind the rally. Several things came together at once.
One of the biggest was Washington.
President Trump met with crypto executives last week and urged Congress to move forward with the CLARITY Act, which would establish clearer rules for digital assets in the United States.
Regulatory uncertainty has been one of the biggest headaches hanging over crypto for years, so any progress toward clearer rules is a positive.
Then came the Treasury Department’s decision to increase its purchases of longer-term government debt. That initially pushed bond yields lower and increased liquidity, two things that tend to be good for risk assets like bitcoin.
And then the rally started feeding on itself.
Traders had built up large bets that bitcoin would continue falling. Once the price began moving higher, many of those short positions were forced to close, creating additional buying. More than $2.7 billion in bitcoin shorts were reportedly liquidated on Wednesday alone.
That’s rocket fuel for a short-term rally.
But the more interesting question isn’t why bitcoin jumped over 20% in a week.
It’s what happens next.
Bitcoin has changed dramatically since I first started recommending it.
Back then, buying bitcoin was an adventure. Today, you can buy exposure through your regular brokerage account using spot bitcoin ETFs from companies such as BlackRock and Fidelity.
And Wall Street has embraced them.
Despite weakness earlier this summer, flows into U.S. spot bitcoin ETFs came roaring back last week, with weekly inflows through Thursday reaching their highest level since last October.
That’s an important difference between today’s bitcoin market and the one I started following years ago. Bitcoin isn’t sitting outside the traditional financial system anymore. It’s increasingly becoming part of it.
That doesn’t mean the volatility has disappeared. Far from it.
Bitcoin reached an all-time high above $126,000 last year before getting cut by more than half. Anyone who thinks a 20% weekly gain means we’re going straight back to the highs probably hasn’t owned bitcoin very long.
I’ve lived through enough crypto cycles to know better.
The first big test is whether bitcoin can hold onto these gains once the short squeeze runs its course.
That’s important because forced buying from traders closing losing positions doesn’t last forever. For this move to develop into something much bigger, fresh money needs to keep coming into bitcoin.
So that’s what I’ll be watching.
If ETF inflows remain strong, regulatory progress continues, and bitcoin can establish a new uptrend after spending months correcting, I think the setup becomes very interesting.
And remember where we are in the bigger picture.
Bitcoin is still well below last year’s record high. Institutional adoption continues to grow. The regulatory environment in Washington is far friendlier than it was a few years ago. And bitcoin’s fixed supply hasn’t changed.
That’s why I’ve never viewed bitcoin as a trade that lasts a few weeks or months.
I’ve been through $600 bitcoin. I’ve watched it run to $20,000, crash below $4,000, climb above $60,000, crash again, and eventually break through $100,000.
Every time bitcoin gets knocked down, somebody declares it dead.
And yet here we are.
Last week’s rally doesn’t guarantee another run to record highs. But after one of bitcoin’s strongest weeks in years, I certainly wouldn’t bet against it waking up again.
