Bitcoin just had its best week since 2023. After six frustrating weeks chopping between $62,000 and $67,000, the largest cryptocurrency exploded higher—briefly touching $78,000 before settling above $77,000. By Friday, Bitcoin was trading at $77,116, up nearly 23% over seven days.

What made this move different wasn’t just the size, it was the speed. On August 19 alone, Bitcoin posted its best single-day gain in six months, rising over 7%. By the time the dust settled, crypto markets had added roughly $280 billion in market cap within 24 hours. That’s $12 billion per hour.

For me, the telling detail is what happened underneath the surface. This wasn’t organic buying. It was a textbook short squeeze, and one for the history books.

The Short Squeeze That Changed Everything

Between August 19 and 21, over $2.1 billion in short positions were forcibly liquidated. Total crypto liquidations hit $3.5 billion, the seventh largest liquidation event in crypto history. Short sellers accounted for more than $3 billion of that total.

Bitcoin itself saw about $1.76 billion in liquidations, with Ethereum adding another $1.16 billion. Over $1 billion in Bitcoin shorts were wiped out in roughly one hour on August 19 alone. The cascade pushed BTC from $64,920 to an intraday high of $72,496.

“This wasn’t organic buying; it was forced covering that turned into genuine momentum,” as one analysis put it.

The Treasury Move That Started It All

So what lit the fuse? The U.S. Treasury announced it would at least double its long-term bond buyback operations, from $2 billion to $4 billion per operation, starting September 9. The 30-year Treasury yield had hit a 19-year high of 5.34% days earlier. The announcement sent yields crashing and capital flooding into risk assets.

Standard Chartered’s Geoff Kendrick characterized the operation as the type of government liquidity intervention from which Bitcoin has historically benefited.

CryptoQuant founder Ki Young Ju noted that Bitcoin demand turned positive across both spot and perpetual futures markets for the first time since October 2025. “The scale remains modest,” he wrote, “but if this holds for another month, it would be reasonable to conclude that the bear market is over and a new bull cycle has begun”.

Trump, the White House, and the CLARITY Act

The Treasury move didn’t happen in isolation. On August 19, Trump hosted crypto executives at the White House, calling on Congress to pass the CLARITY Act. The bill, which would define whether digital assets are regulated as securities or commodities, had been stalled in the Senate.

But here’s the tension, and it’s a big one. Trump also name-dropped Hyperliquid, saying CFTC Chair Mike Selig is “working to bring Hyperliquid into the United States in a fully compliant and legal fashion”. That’s not a policy. That’s a shout-out.

And on the CLARITY Act’s three sticking points, ethics provisions targeting Trump’s $1.4 billion in crypto income from World Liberty Financial and the TRUMP memecoin, stablecoin yield rules that threaten Coinbase’s $1.35 billion annual USDC rewards revenue, and DeFi protocol classification, there was no concrete compromise.

“Congress needs to take the next step,” Trump said. “It’s a very, very powerful structured legislation which will keep us ahead of China.”

Coinbase CEO Brian Armstrong was more direct: “This would make all of the progress that this administration has made durable into the future.”

But Solana Policy Institute CEO Miller Whitehouse-Levine put it bluntly: “Right now, I would say it’s in August recess purgatory.”

The numbers tell the story. In February, prediction markets gave the CLARITY Act an 82% chance of becoming law in 2026. Today? Polymarket prices it at 21% on more than $7 million in trading volume. Kalshi traders put it at 23%, down from 50% less than a month ago. Galaxy Digital cut its own estimate to 10% on August 14.

The Senate confirmed on August 6 that it would not vote on the 309-page bill before the August 7 recess. Senate Majority Leader John Thune filed cloture on August 8, a procedural motion that doesn’t pass the bill, it just allows debate to begin. That vote is set for September 15. Lawmakers return September 14. That leaves roughly 14 working days before midterm campaign season makes progress structurally impractical.

Bitcoin’s Governance Crisis: The BIP-110 Disaster

While the price was ripping, something else was happening beneath the surface—something that might matter more for Bitcoin’s long-term future than any short squeeze.

The Bitcoin network erupted in controversy this week over BIP-110, a proposal by legendary developer Luke Dashjr to restrict Ordinals inscriptions and BRC-20 tokens. The proposal required a 55% signal threshold from miners—already unusually low compared to the historical 90-95% standard. But even this low bar proved insurmountable. Support never climbed above a meager 2.53%.

Then things got personal. On August 9, fellow BIP editor Mark “Murch” Erhardt formally recommended Dashjr’s removal, citing procedural grievances: that Dashjr had abused his editorial powers to assign a BIP number to his own proposal before it was properly discussed, that he merged updates without due process, and critically, that he had contributed less than 1% of editorial comments in the BIP repository since April 2024.

On August 10, Luke Dashjr was formally stripped of his BIP editing privileges. It was, as many noted, one of the most dramatic governance actions in Bitcoin Core’s history.

Dashjr didn’t go quietly. He took to X to denounce his removal as “an abuse of power,” and even referred to the majority chain as “Bpedo.” He announced he was taking a sabbatical from his role at Ocean mining pool to focus on Bitcoin and open-source projects.

Samson Mow, CEO of JAN3, publicly criticized Bitcoin Core developers, arguing they brought this dispute upon themselves by relaxing the OP_RETURN limit in version 30.0. “The same situation would happen again unless Bitcoin Core developers acknowledged responsibility for directly triggering the BIP-110 movement,” Mow stated.

The drama shows that while individuals can propose changes, they cannot command them. The market didn’t even flinch, with Bitcoin’s price remaining largely unaffected.

ETF Inflows: The Institutional Stamp of Approval

The institutional money followed. U.S. spot Bitcoin ETFs recorded $606.29 million in net inflows on August 20, the largest single-day inflow since May 1. BlackRock’s IBIT alone absorbed $502.99 million, about 83% of all inflows.

Over four trading days, cumulative inflows reached roughly $1.61 billion, pushing August’s total to $2.07 billion, the strongest month of the year, surpassing April’s $1.97 billion.

What’s Next?

The rally has been nothing short of spectacular, but caution signs are flashing. Bitcoin perpetual funding rates just hit their highest level in 20 months.When everyone’s on the same side of the trade, the unwind can be brutal.

The CLARITY Act remains uncertain. The Senate has only 14 working days before midterms consume everything. The September 15 cloture vote is just procedural—it requires 60 votes to even begin debate. Republicans hold 53 seats but are expected to lose Senators Hawley and Paul on the vote. That means they need at least eight Democrats to cross over. Only two did so in committee.

As NostrMag put it: “I think this is the most overhyped, under-delivered moment for Bitcoin since the ETF approval. The price is at $69,500, but the rally was built on expectation, not reality.”

Summary

Bitcoin surged nearly 23% this week, its best weekly performance since 2023, driven by a U.S. Treasury bond-buying expansion that triggered the seventh largest liquidation event in crypto history. Over $3.5 billion in positions were wiped out, with short sellers bearing the brunt. The White House added fuel with Trump’s push for the CLARITY Act and a crypto industry meeting, but the bill’s odds have collapsed from 82% to 21%. Meanwhile, Bitcoin’s governance erupted as developer Luke Dashjr was stripped of his BIP editing privileges after his proposal failed with only 2.53% support, one of the most dramatic governance actions in Bitcoin Core’s history. Spot Bitcoin ETFs posted their strongest monthly inflows of the year, led by BlackRock’s IBIT. But with funding rates at a 20-month high and the CLARITY Act stuck in Senate purgatory, the sustainability of this rally remains an open question.