Bitcoin extended its rally on Friday, capping its strongest weekly performance since 2023, as more than $1 billion in shortsellers' positions were wiped out and exchange-traded funds pulled in billions in new cash.

The leading cryptocurrency was recently trading 23% higher over a seven-day period after pushing past $77,542, having earlier in the day reached as high as $79,319.

The rise has been driven by American investors quickly piling into exchange-traded funds, with the vehicles taking in over $1.6 billion so far this week, according to Farside Investors data. Spot Bitcoin ETFs, which the Securities and Exchange Commission approved in January 2024, let investors gain exposure to the cryptocurrency through ordinary brokerage accounts rather than holding the coin directly, and their daily flows have since become a closely watched gauge of demand from traditional investors.

CNBC analysts said the coin's rise is its best performance since 2023 and was triggered by the Treasury Department's Wednesday announcement that it would at least double the size of its long-dated bond buybacks. The announcement helped send yields lower, while assets such as bitcoin and gold have shot up. The dollar is trading at a three-month low and is on track for its worst week of August. Lower long-term yields reduce the opportunity cost of holding non-yielding assets and generally support risk-on sentiment.

Those betting on the cryptocurrency's price to fall were also hit hard. Data from Coinglass, a crypto derivatives data tracker, shows that over $1 billion in short positions were closed. Liquidations occur when an exchange forcibly closes a leveraged position after the price moves sharply against it and the trader's margin can no longer cover the losses. In a note Friday, Geoffrey Kendrick, Standard Chartered's Global Head of Digital Assets Research, said Thursday was the largest liquidation of Bitcoin shorts ever, with $1.1 billion in bets closed.

Bitcoin's volatility had dropped significantly over June and July, with the price mostly trading below $65,000.

Investors have this week frantically bought shares of Bitcoin ETFs, with the funds receiving $606.3 million on Thursday — one of their biggest trading days this year.

Positive regulatory news coming out of the White House is also helping. President Donald Trump held a meeting with crypto executives earlier in the week and urged lawmakers to get the Clarity Act over the line. A vote on the long-awaited crypto legislation, which the digital asset industry has long called for, will go ahead in September. The bill, formally the Digital Asset Market Clarity Act, is designed to set a federal framework for digital assets, including clarifying which tokens are regulated as securities by the Securities and Exchange Commission and which fall under the Commodity Futures Trading Commission — uncertainty the industry has said has kept many large financial firms out of the market.

This article was first published on Bitcoin Magazine and is written by Mathew Di Salvo.