Bitcoin is extending its gains, rising above $77,000. More than $1 billion flowed into spot bitcoin exchange-traded funds over two days. Expectations of changes in the U.S. policy environment and large-scale short-position liquidations also increased the size of the rise.

On Aug. 21, blockchain outlet Decrypt assessed that bitcoin's rise grew larger as institutional buying resumed while large-scale short-position liquidations also took place.

The increase in spot demand was also confirmed in fund flows for spot bitcoin ETFs. Spot bitcoin ETFs recorded net inflows of about $517 million on Aug. 19 and about $606 million on Aug. 20. Earlier this month, they also drew a total of about $853.5 million over five consecutive trading days.

Macro conditions also supported the rally. Lacy Zhang (레이시 장), an analyst at Bitget, analyzed that the U.S. Treasury's plan to expand long-term Treasury buybacks led to a weaker dollar and revived demand for stores of value such as bitcoin and gold.

Julio Moreno (훌리오 모레노), an analyst at CoinShares, also pointed to the U.S. Treasury's announcement and U.S. President Donald Trump's mention of the possibility of government-level bitcoin purchases as catalysts. He added that spot demand had shown signs of recovery several days before those announcements.

Policy currents in Washington also affected market sentiment. Trump urged Congress to pass a "fair version" of the Clarity Act in a meeting with crypto and finance industry figures at the White House last week. The bill contains provisions to create a federal regulatory framework for digital assets and to delineate the roles of the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Some assessments say bitcoin's direct gains may be limited. Moreno said bitcoin has already secured relatively high regulatory clarity in the United States and is widely treated as a commodity, with ETF and institutional access channels already in place. He said the Clarity Act could significantly change investability for other cryptocurrencies but is not of a nature that brings radical change to bitcoin.

The market is also showing a view that the regulatory risk premium is falling. Zhang said the regulatory risk premium is being re-priced lower after Trump again urged passage of the Clarity bill. Expectations for stronger demand were also cited as growing because clearer rules make it easier for institutions to set exposure.

In this flow, investors betting on declines suffered heavy losses. Zhang estimated that more than $4 billion in crypto short positions were liquidated over two to three days. Of that, $2.7 billion was closed out in about 24 hours, with an additional $1.2 billion the next day. About $2.75 billion in bitcoin short positions alone were liquidated in the initial surge, one of the largest instances of forced short covering in the recent crypto market.

Future variables are legislative progress and whether spot demand continues. The Clarity Act is currently deadlocked in Congress, and the Senate is expected to take up the bill again in September. CFTC Commissioner Michael Selig (마이클 셀릭) said on Aug. 20 he instructed staff to review crypto market structure rules within the scope of the commission's existing authority. That leaves the next point to watch as whether bitcoin's strength will continue on policy expectations alone, or whether actual inflows will keep providing support.