Bitcoin's latest rally is being supported by short covering and strong spot ETF demand, but the sustainability of these gains faces scrutiny as momentum indicators shift, according to QCP Research.
Open interest has declined even as BTC advanced, a sign that the rally is driven partly by short covering rather than new leveraged long positions. Spot ETF inflows have provided additional demand, with QCP noting that inflows are nearing the 95th percentile of the past year. However, the firm cautioned that the rally could weaken if short covering loses momentum and is not replaced by fresh demand.
Liquidity Management Over Accumulation
Bitcoin-focused company Strategy raised $2.01 billion through an at-the-market equity sale between August 17 and 23 but did not add to its Bitcoin holdings, maintaining its position at 840,447 BTC for a second consecutive week. The company also built a $1.59 billion cash reserve, bringing total dollar assets to $6.69 billion. QCP viewed this financing as liquidity management rather than immediate accumulation, noting Strategy's average purchase price of $75,385 per BTC.
Macro Risks and Near-Term Catalysts
Broader economic signals have added uncertainty to markets. Federal Reserve meeting minutes showed a 9-3 vote, with three officials preferring a 25-basis-point rate hike. Treasury Secretary Scott Bessent announced plans to double the maximum size of long-term Treasury buybacks to $4 billion per operation beginning September 9, a move that pushed Treasury yields lower and the US dollar to a three-month low.
QCP noted that a weaker dollar and elevated long-term yields could support Bitcoin and gold amid ongoing fiscal concerns. Energy markets add another layer of uncertainty, with tensions around Iran and the Strait of Hormuz raising supply concerns as tanker crossings decline.
With jobless claims due Thursday and Fed official Kevin Warsh speaking at Jackson Hole on Friday, several near-term catalysts remain in focus. Bitcoin could remain range-bound heading into the September Federal Reserve meeting as markets assess whether current demand can sustain the rally.
