Bitcoin rallies 20% this week amid Treasury bond intervention and short squeeze

Bitcoin was on track for a weekly gain of around 20% early on Friday, following a spate of positive developments for the world's largest cryptocurrency.

Bitcoin was last seen at $75,343.01, up from $62,836.88 at the start of the week. Crypto stocks followed suit on Thursday, with Coinbase and Circle closing up 7.5% and 6.45% each, while Strategy rose 7.8%.

The ProShares Bitcoin strategy ETF was up 5.5% in premarket trading.

The rally began Wednesday when Treasury yields pulled back sharply following the Treasury's bombshell intervention in the bond market, easing pressure on risk assets.

That helped trigger a broader move into crypto, which was later amplified by a massive short squeeze, with roughly $2.7 billion in crypto short positions liquidated, according to CoinGlass.

Bitcoin's move reflects an alignment of macro and policy catalysts, according to Max Stuedlein, head of Partnerships at Sygnum APAC.

"The Treasury's decision to double its buybacks of long-dated government debt is aimed at addressing long-term yield concerns, where borrowing costs have been rising on concerns over US debt levels and partial crowding out by debt issuances of hyperscalers," he said.

Investor sentiment improved further on Thursday largely due to a last-ditch push from the White House and crypto industry leaders to get the Clarity Act across the finish line in the coming weeks. The bill is widely viewed as a key catalyst that could push the market out of the crypto winter that began last fall, but the chances of it passing appear relatively slim.

Despite the recent rally, Bitcoin remains well below a 2026 high of $94,820 achieved in mid-January and an all-time high of $126,198, which it hit on October 6 last year.

Lucy Gazmararian, founder and managing partner at Token Bay Capital, told CNBC's "Squawk Box Europe" on Friday that crypto is coming to the end of its bear market.

"We're expecting one final flush, and for it to drop another 20%, so that it's in keeping with prior cycles," she said. "The market was heavily leveraged short, and they've been wiped out. So I think it's the market expectation – they're very savvy to the cycles of Bitcoin, and they position accordingly in those final months before the cycle turns from bull to bear and vice versa."

She called on investors in Bitcoin to "hold the longer-term thesis," labeling Bitcoin trades "a play against monetary debasement."

"But in the shorter term, it's very much moving along these cycles because it's still a very volatile asset," she told CNBC. "So it's a great playground for traders, and now we have so many tools to place bets either way on Bitcoin now."