Crypto liquidations near $2 billion as US Treasury debt buyback sparks short squeeze

• The crypto market saw nearly $2 billion in liquidations after a price jump wiped out short positions.
• Bitcoin and Ethereum gained 5% and 9%, respectively, as the short squeeze pushed crypto prices higher.
• The intense short liquidations follow the US Treasury's decision to double its debt buyback operation.

The cryptocurrency market has seen nearly $2 billion in liquidations over the past 24 hours, its largest since February 5.

Short liquidations accounted for $1.75 billion, their largest since the October 10 leverage flush, and represented the first major short squeeze in a long while.

Short squeezes are a fast, sharp rise in an asset's price that forces traders who bet on downside (short sellers) to buy the asset back to cut losses. This buying rush pushes the price even higher.

Bitcoin (BTC) gained over 5% as it edged above $68,000 following the move, its highest level since June 2. Liquidations for the top crypto reached $1.14 billion, with shorts representing $1.11 billion.

Ethereum (ETH) saw a 9% jump, climbing past the $2,000 psychological level for the first time since June 1. The top altcoin saw $513.6 million in liquidations, led by $464.8 million in short liquidations.

Solana (SOL) and XRP also posted notable gains, both rising by roughly 6% in the past 24 hours at the time of writing.

US Treasury debt buyback expansion improves crypto sentiment

Most of the recent rise and liquidations, roughly $1.8 billion, came within four hours of the US Treasury's decision to double buybacks for long-dated bonds. The operation will take effect from September 4 through November 4, after which the Treasury "will provide more information about future buyback sizes at the next Quarterly Refunding," scheduled for the same day.

After the move, the 30-year bond yield dropped to 5.197%, a 14-basis-point decline from its multi-decade high of 5.337%, which it set earlier on Tuesday. The 10-year bond barely flinched as it dropped from 4.677% to 4.657%, while the 5-Year Note eased from 4.382% to 4.359%.

The decline in bond yields is also improving the wider crypto market sentiment. The CMC Crypto Fear and Greed Index has jumped from near-Fear territory at 41 to Neutral at 51. That represents its highest level since mid-May.

The general crypto market cap is at $2.4 trillion, up 5% over the past 24 hours, at the time of writing.