Bitcoin jumped above $68,000 on Wednesday after a sharp rally forced traders who had bet on a price decline to close their positions. The scarce digital asset climbed as high as about $72,500 before pulling back slightly.

The move pushed the wider digital asset market higher, with the total market value rising to roughly $2.41 trillion.

The biggest story, however, was the huge number of short positions that were wiped out.
According to CoinGlass data, about $3.31 billion in broader digital asset positions were liquidated over the previous 24 hours at the time of writing.

Short positions made up over $3 billion of that amount.

Most of the liquidations happened very quickly. About $1.78 billion in positions were closed during a four-hour period, while long liquidations totaled about $173 million in the same timeframe.

Bitcoin accounted for about $1.68 billion of the liquidated short positions. The largest single liquidation was a bitcoin position worth about $48.8 million on Hyperliquid.

The rally began after the US Treasury announced that it would at least double the size of its planned buybacks of longer-term government bonds.

The Treasury said it will increase the maximum size of buyback operations for 10- to 20-year and 20- to 30-year government bonds from $2 billion to at least $4 billion per operation. The change starts September 9.

The announcement came after long-term US Treasury yields had risen sharply. High yields can put pressure on bitcoin because investors can earn relatively attractive returns from government bonds without taking the risks associated with digital assets.

After the Treasury announcement, the 30-year Treasury yield fell to about 5.21%, while the 10-year yield dropped to around 4.66%.

The Treasury said the larger buybacks were meant to provide “greater liquidity support in longer-dated nominal sectors where there is consistent strong sponsorship from market participants.”

The Treasury move does not reduce the US government's overall debt. It is also not the same as the Federal Reserve buying bonds and creating new money. Instead, the Treasury says the program is designed mainly to improve liquidity in the long-term bond market.
Still, the change helped improve sentiment across financial markets.

Bitcoin had spent weeks moving mostly between about $59,000 and $67,000. During that period, many traders were betting that the price would fall.

When bitcoin finally broke above $67,000, those bets started to go wrong.

A short position is essentially a bet that an asset will fall. If the price rises too much, the exchange can automatically close the position to prevent further losses. Closing a short position requires buying the asset.

That buying can push the price even higher, causing more short positions to be liquidated.
This creates what traders call a short squeeze. That appears to be what happened Wednesday.

Bitcoin moved from around $65,888 to $68,529 in a relatively short period as liquidation levels were hit. The forced buying helped turn a steady recovery into a much faster rally, topping at $72,500 on some exchanges.

There were signs that the rally had support beyond short liquidations. US spot bitcoin ETFs recorded about $297 million in inflows on August 17, $189 million on August 18, and a whopping $517 million on August 19.

That certainly reversed $385.2 million in net outflows recorded during the previous week. The fresh ETF demand is important because it represents actual investment into bitcoin rather than traders simply closing leveraged positions.