Bitcoin Jumps 5% Amid Oil Price Relief and Short Squeeze Potential

Bitcoin is adding to overnight gains in early U.S. Trading on Friday, continuing a relative outperformance against assets like stocks and precious metals after months of lagging. Trading at $73,800 as of 11:30 AM EST, bitcoin is higher by nearly 5% over the past 24 hours, a surge largely attributed to a move by the U.S. Treasury to address concerns about rising oil prices. The cryptocurrency briefly touched $74,000, nearing a one-month high.

The rally began Thursday evening after U.S. Treasury Secretary Scott Bessent announced the Trump administration would temporarily authorize countries to purchase Russian oil currently in transit, a move intended to cap surging prices. The announcement sent bitcoin jumping, and simultaneously pulled the price of oil down by about $2 per barrel.

Oil Price Concerns and the Macroeconomic Backdrop

The recent spike in oil prices has been a significant headwind for the global economy, putting direct pressure on household budgets and raising the specter of stagflation – a combination of slow economic growth and rising inflation. WTI crude oil traded at $94.50 per barrel on Friday, down from a recent high of nearly $98, but still representing a substantial increase in recent weeks. Olu Sonola, head of US economics at Fitch Ratings, warned that sustained high oil prices could weaken consumer spending and slow economic growth. “The Fed can shrug off pockets of weakening growth, but resurgent inflation severely limits its room to maneuver, leaving policy potentially stranded for months,” according to a note from Sonola.

The Treasury’s decision to allow the purchase of Russian oil, while potentially controversial, is a direct attempt to increase global supply and alleviate price pressures. The move underscores the administration’s concern about the economic impact of high energy costs, even as it navigates geopolitical complexities. It’s a calculated risk, balancing the need for energy security with the desire to maintain economic stability.

Bitcoin’s Relative Strength

Bitcoin’s outperformance since the outbreak of the Iran conflict roughly two weeks ago is notable. The cryptocurrency is now up about 11% since then, while broad U.S. Stock indices and gold have both lost ground. This suggests a potential shift in investor sentiment, with some viewing bitcoin as a safe haven asset in times of geopolitical uncertainty. Though, it’s important to note that this is a relatively recent trend, and the long-term implications remain unclear.

The rally as well comes after a period of particularly negative sentiment in the bitcoin market. Funding positioning of perpetual futures traders has been negative for the longest period since late 2022, coinciding with the collapse of FTX and a steep decline in BTC’s price to around $16,000 (from $69,000 a year earlier). K33 Research analyst Vetle Lunde pointed out that the 30-day average funding rate has been negative for 14 consecutive days, a pattern that has historically coincided with local price bottoms.

Short Squeeze Potential

The combination of negative funding rates and rising open interest in perpetual and dated futures – up 9% over the past 24 hours to around 700,000 BTC – creates the conditions for a potential short squeeze. Which means that traders who have bet against bitcoin (shorted the asset) may be forced to cover their positions, driving the price even higher. A short squeeze is not guaranteed, but it represents a significant upside risk for bitcoin in the near term.

Treasury Secretary Bessent’s Stance on Crypto

While Bessent’s recent move has provided a boost to bitcoin, his overall stance on cryptocurrencies remains cautious. Responding to Senator Brad Sherman, Bessent stated he has no authority to direct U.S. Banks or taxpayer funds to buy bitcoin or so-called “Trump coins.” This clarifies the administration’s position on direct government investment in cryptocurrencies, despite previous discussions about a strategic Bitcoin reserve. The Street reported in August 2026 that Bessent had previously expressed reservations about the feasibility and desirability of such a reserve.

March Momentum and Looking Ahead

The current rally could signal a turning point for bitcoin after a prolonged period of underperformance. March is shaping up to be a positive month for the asset, currently up about 8%. A March advance would break a five-month losing streak, potentially attracting renewed investor interest. Friday’s gain is also the first since the Middle East conflict began on February 27, suggesting a possible stabilization of the market ahead of the weekend, which has recently seen declines on Saturdays and Sundays.

What’s next: Regulatory scrutiny and macroeconomic factors will continue to shape bitcoin’s trajectory. Investors will be closely watching for further developments in the oil market, as well as any policy announcements from the Treasury Department regarding cryptocurrencies. The Federal Reserve’s monetary policy decisions will also play a crucial role, as rising inflation could limit the Fed’s ability to respond to economic slowdowns.