Bitcoin surged above $79,500 on Friday, marking its strongest level in months as traders rushed to close bearish positions and signals from Washington pointed to easier financial conditions and stronger support for the cryptocurrency industry.

The world’s largest cryptocurrency reached an intraday high of $79,500 before retreating to around $77,700. The move left Bitcoin more than 25% higher than it was at the start of the week, making it one of the digital asset’s sharpest weekly rallies in years.

Bitcoin had spent much of 2026 struggling to regain momentum after falling from its record high of about $126,000 reached in October last year. The cryptocurrency dropped to roughly $57,600 in early July and then traded in a narrow range between $62,000 and $66,000 for six consecutive weeks.

The prolonged weakness encouraged traders to increase bets that Bitcoin would fall further. Once the cryptocurrency broke above its recent trading range this week, those positions were rapidly unwound, creating a wave of forced short covering that accelerated the price increase.

Ether, the second-largest cryptocurrency, and other digital assets also gained as traders moved back into riskier assets.

Market momentum was strengthened by signs of additional liquidity from the US Treasury. The department doubled the size of its bond buybacks earlier this week in an effort to ease pressure in the Treasury market. When bond yields rose again, Treasury Secretary Scott Bessent said on Thursday that the government could increase the buybacks further.

Lower borrowing costs, improved liquidity and a weaker dollar can encourage investors to put more money into assets considered riskier, including cryptocurrencies.

Regulatory developments in Washington also supported the rally. On Tuesday, the US Securities and Exchange Commission proposed “Regulation Crypto Assets”, which would introduce lighter registration requirements for some cryptocurrency issuers.

President Donald Trump added to the industry’s optimism when he hosted several major crypto executives at the White House on Wednesday. Among those attending were Coinbase Chief Executive Brian Armstrong, Ripple Chief Executive Brad Garlinghouse and Gemini founders Cameron and Tyler Winklevoss.

Trump urged lawmakers to approve the long-delayed Digital Asset Market CLARITY Act. The legislation would divide regulatory responsibility for digital assets between the SEC and the US Commodity Futures Trading Commission. It passed the House last year but remains stalled in the Senate, where it will face a key procedural vote on September 15.

Trump’s comments also sparked a sharp move in Hyperliquid’s HYPE token. He said the CFTC was working to bring the decentralised derivatives exchange onshore in a fully compliant manner.

HYPE jumped about 25% within 24 hours of the remarks and was trading near $74, more than 30% above its level before Trump’s comments. Hyperliquid has become a closely watched example of how far the administration’s more supportive approach to the crypto sector could extend.

The US national debt has surpassed $40 trillion for the first time, while the Treasury has doubled the size of some government bond buybacks in an attempt to calm a market unsettled by rising borrowing costs.

Treasury data showed that total federal debt reached a record $40 trillion on Tuesday. About $32.27 trillion is held by the public, while $7.78 trillion is owed through government accounts.

The milestone came much sooner than previously expected. The Congressional Budget Office had projected in 2023 that US debt would not reach $40 trillion until 2028. The total reached $39 trillion in March and $38 trillion in October last year.

The Treasury has borrowed about $1.8 trillion during the first 10 months of the current fiscal year, already exceeding the amount borrowed during the entire previous fiscal year. Spending on Social Security, Medicare, defence and interest payments continues to exceed government revenues.

Against that backdrop, the Treasury announced plans to increase the size of selected debt buyback operations. Beginning September 9, the maximum size of each operation in the 10-to-20-year and 20-to-30-year sections of the bond market will rise from $2 billion to at least $4 billion.

Treasury said the increase reflected strong demand from market participants for buybacks in those maturity ranges.

The announcement followed a sharp rise in long-term borrowing costs. The yield on the 30-year Treasury bond reached its highest level since 2007 on Tuesday as investors became more cautious about buying long-dated US government debt.

The increase in yields has also been linked to a growing supply of corporate bonds, including debt raised to finance artificial intelligence data centres.

Treasury bond yields fell after the buyback announcement, with the 30-year yield dropping about nine basis points and the 10-year yield falling roughly six basis points. US stocks also moved higher.

Treasury buybacks involve the government purchasing older securities from investors with existing cash. The transactions can improve trading liquidity but do not directly reduce the overall amount of federal debt.

Some economists questioned whether the move was large enough to address the underlying problem. The Treasury market is worth about $32 trillion, making the increased buyback amount relatively small compared with the size of the market.

The growing debt burden creates a difficult cycle for policymakers. Higher debt can make investors demand greater returns to hold long-term securities, pushing yields higher. Higher yields then increase the government’s interest costs, adding to future borrowing requirements.

David Young, president of the Conference Board’s CEO Center, said the national debt affects financial decisions made by households and businesses.

The latest Treasury action may ease short-term pressure in the bond market, but it does not address the underlying increase in federal borrowing. The record debt level is therefore likely to remain a major issue for US financial markets and policymakers.