Bitcoin has climbed nearly 24% from below $64,000 toward $80,000 as U.S. spot ETF inflows and forced short covering have fueled its strongest weekly advance since March 2023.

Nansen senior research analyst Nicolai Søndergaard told crypto.news that Bitcoin has probably established an important local bottom, although he wants more evidence from U.S. spot markets before treating the rally as a confirmed cycle turn.

Bitcoin traded close to $80,000 on Aug. 24 after advancing from below $64,000 on Aug. 19. The asset reached approximately $79,550 during the run, its highest price since May, according to recent market coverage.

Søndergaard said selling pressure has eased, some whales have resumed selective accumulation, and ETF flows have improved. However, he noted that recent readings still showed weak U.S. spot demand, a price below important holders’ cost bases, and derivatives positions recovering before clear confirmation from cash-market buyers.

“I view Bitcoin’s latest rally as a meaningful improvement in market structure, but not yet as confirmation that the cycle has definitively turned,” Søndergaard said.

Under his base case, Bitcoin is passing through the final stages of a bottoming process rather than beginning a confirmed market-wide advance. Sustained trading above $80,000, once leverage settles, would provide stronger evidence that buyers can support the move without relying on forced position closures.

Bitcoin’s $80K test requires sustained ETF demand

Bitget Wallet research analyst Lacie Zhang said ETF purchases, favorable macro conditions and progress on U.S. crypto regulation have given the rally genuine support. Yet she also attributed part of its speed to traders buying Bitcoin to close leveraged bearish positions.

U.S. spot Bitcoin ETFs collected about $1.9 billion during the week ending Aug. 21, including roughly $606 million on Aug. 20, according to figures cited by the analysts. The funds recorded five straight trading days of inflows, providing a source of spot demand as Bitcoin moved through several resistance levels.

Zhang said the market’s next test will arrive after forced covering loses momentum. ETF buyers would need to keep absorbing available supply while lower yields and a softer dollar maintain a supportive setting for risk assets.

“The latest move looks real, but it is also very fast,” Zhang said.

“For the rally to sustain above $80K, we need to see fresh spot demand continue after the forced covering fades.”

Separate Bitfinex analyst comments also pointed to a combination of spot buying and short covering rather than a rally built mainly on new leveraged longs. During the first part of the breakout, Bitcoin gained between 10% and 11% while aggregate open interest increased by about 4%, according to the firm.

Bitfinex analysts said the difference between price growth and open-interest growth suggested that new leverage played a smaller role. Open interest rising faster than underlying demand would present a less stable setup, particularly if Bitcoin stopped advancing while traders continued adding futures positions.

Søndergaard wants to see a positive Coinbase premium and spot-led trading volume alongside continued ETF inflows. He also said funding should remain moderate, while open interest must not rebuild faster than demand in the underlying market.

Short liquidations accelerated Bitcoin’s rise

The first stage of the rally developed as Bitcoin cleared resistance around $65,000 and moved through liquidation clusters above $67,000. Exchanges then closed short positions that no longer had enough collateral, generating market buy orders that pushed prices higher and triggered additional liquidations.

An earlier liquidation event analysis found that more than $3 billion in leveraged shorts were closed across crypto derivatives markets on Aug. 19 and Aug. 20. Short positions accounted for approximately $2.77 billion, or 92% of the total, while about $1.29 billion was liquidated within a single hour.

Bitcoin shorts made up roughly $1.37 billion of the total, while Ethereum shorts accounted for around $1.01 billion. Binance recorded approximately $518 million in liquidations, Hyperliquid handled about $513 million, and Bybit registered close to $303 million.

Forced buying can increase prices quickly, but each purchase created by a liquidation closes an existing position rather than establishing continuing demand. Søndergaard said a return of rising funding and rapidly expanding open interest during another test of $80,000 would make the advance appear increasingly squeeze-led.

“If $80,000 rejects again while open interest and funding continue to rise, I would interpret the rally as increasingly squeeze-led, leaving room for another correction at some point.”

U.S. spot demand, therefore, remains important for American investors using exchange-traded funds to gain exposure without directly holding Bitcoin. Persistent net inflows would show that investment products are still adding BTC after most of the bearish leverage has already been removed.

Bitcoin could target $90K after a confirmed breakout

Zhang said a clean close above $80,000 followed by a successful defense of the level could open a move toward $85,000–$90,000 over the following weeks. An accelerated run toward $95,000–$100,000 is also possible under her scenario if ETF inflows remain strong and liquidity conditions continue improving.

Still, Zhang described the market as stretched after a weekly gain of about 20%. Rising funding rates, weaker ETF flows, or a failure to retain $80,000 after crossing it could lead to a reset before another advance, she said.

Søndergaard also expects any recovery outside Bitcoin to remain selective. In his view, investors are directing more capital toward assets with measurable use, fee income, token burns, buybacks, or another clear method of returning value to holders.

Under that framework, he described Bitcoin as institutional macro exposure while naming HYPE, selected decentralized finance protocols, and real-world asset infrastructure as candidates for crypto-native capital. He cautioned that higher Bitcoin prices would not automatically lift most altcoins.

“HYPE has a stronger value-accrual case than most tokens because of its protocol activity and buyback-linked economics, but its large open interest also makes it vulnerable to crowded positioning,” Søndergaard said.

ETH and SOL could signal whether the rally is spreading

Zhang expects Ethereum and Solana to receive the first rotation of capital if Bitcoin’s advance starts extending into other parts of the market. Their liquidity makes them more likely to move before infrastructure projects, DeFi tokens, and assets with higher sensitivity to risk appetite, according to her assessment.

Bitcoin dominance would provide one of the main indicators. Zhang said a stalled or declining dominance rate, combined with a rise in the total cryptocurrency market capitalization excluding Bitcoin, would offer evidence that demand is reaching more assets.

Movements in the ETH/BTC and SOL/BTC pairs could supply further confirmation because both measure whether Ethereum and Solana are gaining value against Bitcoin rather than merely rising in dollar terms.

Macroeconomic data may also affect spot demand. A report on upcoming U.S. data noted that July Personal Consumption Expenditures inflation and revised second-quarter gross domestic product figures are due on Aug. 26, followed by Federal Reserve Chair Kevin Warsh’s Jackson Hole address on Aug. 28.

June core PCE inflation stood at 3.3%, above the Federal Reserve’s 2% target, while the advance estimate showed annualized U.S. economic growth slowing to 1.5% in the second quarter from 2.1% in the first. Zhang said traders should also monitor stablecoin supply, decentralized exchange volumes, perpetual-futures funding, and whether spot volume leads the next round of gains.

The Crypto Council for Innovation (CCI) and Blockchain Association (BA) filed a lawsuit against Illinois officials regarding the state’s 0.2% tax on cryptocurrency, expected to be enforced starting in January 2027. 

In a lawsuit filed Friday in the Circuit Court of the Seventh Judicial Circuit for Sangamon County, lawyers for the two crypto advocacy groups challenged Illinois’ digital asset tax on the grounds it violated the US Constitution, the state’s constitution, federal and state due process laws and the federal Internet Tax Freedom Act. Illinois Governor JB Pritzker signed the measure into law as a “privilege tax” in June as part of the state’s fiscal year 2027 budget, requiring crypto users to be taxed as applied to transaction volume rather than income.

On the due process claim, CCI and BA argued that the tax was “unconstitutionally vague” by placing the burden on residents and brokers “under the threat of serious civil and criminal penalties” to determine what and how such assets were taxed. Notably, the crypto organizations’ arguments under the US Constitution were based on alleged violations of the Commerce Clause covering interstate commerce, claiming that the state tax “creat[ed] the specter of duplicative taxation.”

“States have an important role to play in fostering innovation, but that authority has constitutional limits,” said Summer Mersinger, CEO of the Blockchain Association and a former commissioner at the US Commodity Futures Trading Commission. “Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market.”

Source: Blockchain Association

The CCI and BA lawsuit followed a similar one filed by the Digital Chamber in July in which that organization argued that the Illinois tax “discriminates against people who transact in digital assets.“ The suits represented the influence of digital asset groups in opposition to laws passed by US state officials during an election year when crypto policy, laws and regulation could influence voters.

Related: Nigeria sets crypto tax collection rules for digital asset platforms

Illinois also targeting prediction markets

Opposition to the crypto tax came amid prediction market platform Kalshi’s lawsuit against Illinois officials over a law that went into effect on July 1. According to the company, the legislation “expressly bans sports event contracts” in violation of federal law by requiring state licensing.

Separately, Pritzker signed an executive order banning state employees from betting on the platforms in April in an effort to ”prevent insider trading amid the rapid growth of online prediction markets and event-based gambling contracts.”

Magazine: Crypto industry ties were a liability in Illinois primary

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Two U.S. crypto trade groups have sued three Illinois officials to stop a 0.2% digital asset tax from taking effect on Jan. 1, 2027.

Illinois crypto tax faces six legal claims

The 39-page complaint, filed by the Blockchain Association and Crypto Council for Innovation in Sangamon County Circuit Court, seeks declaratory and injunctive relief against the Digital Asset Tax Act.

Filed against Illinois Department of Revenue Director David Harris, Attorney General Kwame Raoul, and Sangamon County State’s Attorney John Milhiser, the case challenges the officials responsible for implementing, collecting, and enforcing the tax.

According to the filing, Illinois would impose the levy on the full value of a customer’s digital assets whenever a covered broker exchanges, transfers, or stores them. The groups said a customer could owe the tax even without selling an asset, transferring ownership, or earning a profit.

The complaint sets out six counts under federal and state law. CCI and the Blockchain Association allege that the measure violates the federal Internet Tax Freedom Act, the Commerce Clause, and due process protections under the U.S. Constitution.

At the state level, the groups claim the tax violates Illinois’ Uniformity Clause, unlawfully delegates tax policy to an administrative agency, and fails to meet a state constitutional rule requiring bills to be read by title on three separate days in each legislative chamber.

Calling the measure “unconstitutionally vague,” the plaintiffs said brokers and Illinois customers cannot determine with enough certainty which activities fall under the law or who must collect and remit the tax. The groups argued that the uncertainty carries serious consequences because statutory violations could expose a broker to a Class 3 felony.

The filing also claims that some association members are already spending money on outside legal and tax advice and changing their systems to calculate, collect, and record the levy. According to the plaintiffs, withholding court review would leave affected firms with a choice between limiting service to Illinois customers and risking criminal liability.

Groups say interstate transactions could be taxed twice

Under its Commerce Clause claim, the complaint argues that Illinois has not fairly limited the tax to economic activity within the state. The law allows officials to treat a transaction as occurring in Illinois by relying on details such as a customer’s address, account records, or IP address.

The groups said another state could use its own location test for the same transaction, raising the possibility that two jurisdictions would tax one transfer. A customer with an Illinois address who completes an online transaction while visiting another state could therefore create competing tax claims if both states adopted similar rules, according to the filing.

Illinois also lacks a credit for comparable tax paid to another state, the complaint said. On that basis, the plaintiffs allege that the measure could place interstate digital asset activity at a disadvantage compared with transactions conducted entirely within one state.

Summer Mersinger, CEO of the Blockchain Association and a former Commodity Futures Trading Commission member, said states can support new industries but must remain within constitutional limits.

“Illinois cannot impose a novel tax regime that discriminates against digital commerce, creates uncertainty for consumers and businesses, and threatens to fragment a rapidly growing national market.”

The Internet Tax Freedom Act claim focuses on the tax treatment of online commerce. According to the complaint, the federal law prevents states from imposing discriminatory taxes on electronic transactions when equivalent offline activity receives more favorable treatment.

Illinois does not impose the same levy on the exchange, transfer, or storage of cash, stocks, bonds, or precious metals, the plaintiffs said. The filing gives the example of an Illinois resident who can store gold in a safe deposit box without paying the new tax but would face the 0.2% charge when using a service to hold Bitcoin.

Brokers and Illinois customers could both owe duties

As crypto.news reported in June, Governor JB Pritzker signed the tax into law as part of Illinois’ $55.9 billion fiscal 2027 budget. State budget documents estimated that the levy could generate about $60 million annually.

The law places a 0.2% “privilege tax” on the value of digital assets tied to covered business activity received by an Illinois customer. Covered services include exchanging, transferring, and storing digital assets through a broker.

According to tax advisory firm BDO USA, certain out-of-state brokers can fall under the law when they receive at least $100,000 from Illinois customers during a 12-month period. Location tests can draw on billing details, customer records, mailing addresses, and IP information.

Covered brokers must register with the Illinois Department of Revenue, collect the tax from customers as a separate charge, keep transaction records, and submit monthly filings. When a broker does not collect the levy, the statute directs the customer to assess the amount and pay the department by the 20th day of the following month.

The latest complaint says different sections of the law create uncertainty over which firms must follow each requirement. While one part places collection duties on brokers with an Illinois place of business, another appears to require the broker completing a sale to collect the levy without applying the same revenue threshold, according to the plaintiffs.

CCI and the Blockchain Association also challenged how lawmakers passed the measure. Their filing said Senate Bill 3019 began in January as a two-page proposal concerning loans for agricultural property before lawmakers replaced its contents on the final day of the legislative session.

Two amendments expanded the legislation into a 1,624-page package covering subjects ranging from vehicle weight rules to sports wagering. The complaint said the digital asset provisions took up fewer than 20 pages and contained no legislative findings explaining the tax.

According to the groups, House and Senate committees gave the public about an hour or less of notice before hearings, while both chambers passed the rewritten bill within 24 hours. Pritzker signed it on June 16 as Public Act 104-468.

A second lawsuit targets the same 0.2% levy

The case is the second industry challenge filed against the Illinois tax. In July, the Digital Chamber filed its own lawsuit in the same state court, arguing that Illinois had taxed digital asset services differently from economically similar transactions involving traditional assets.

The Digital Chamber asked the court to declare the law void and unenforceable. Its complaint also alleged violations of federal and state constitutional protections and challenged the state’s decision to base tax treatment on the technology used to record or move an asset.

Public objections began before the budget became law. The Crypto Council for Innovation asked Pritzker to remove the digital asset provisions through a line-item veto, while the Digital Chamber and Illinois Blockchain Association said lawmakers gave affected businesses no meaningful notice.

Strategy co-founder Michael Saylor later called the law a “Big Mistake.” Miles Jennings, general counsel and head of policy at a16z Crypto, said in June that no comparable state financial transaction tax applied to stocks, bonds, or derivatives.

Illinois has also faced a separate court fight over prediction markets. Kalshi challenged a state law that treats sports event contracts as wagers and requires operators to obtain state licenses.

In its federal complaint, Kalshi argued that the Commodity Exchange Act gives the CFTC exclusive authority over contracts listed by federally regulated markets. The company said complying with the Illinois licensing system would create additional expenses, while blocking state residents could require new geofencing systems.

Pritzker had earlier signed Executive Order 2026-04 restricting state employee trading on prediction platforms when nonpublic information obtained through official duties could be used to make a profit or avoid a loss.