Bitcoin Rally Could Lose Steam as Short Covering Fades: QCP

Strong ETF demand is supporting the rally, but fading short covering and lingering macro risks could slow its momentum.

Bitcoin’s latest rally appears to be driven partly by short covering rather than fresh leveraged positions, according to QCP Research. Open interest has fallen as BTC advanced, while strong spot ETF inflows have provided additional demand, the firm noted.

Spot demand is also strengthening, with QCP noting that ETF inflows are nearing the 95th percentile of the past year. However, the firm warned that the rally could become more fragile if short covering loses momentum and new demand does not replace it.

Strategy Raises Cash Without Adding Bitcoin

The market structure comes as Strategy raised more than $1.9 billion without adding Bitcoin to its holdings. The company reported 840,447 BTC for a second consecutive week, leaving its BTC reserve unchanged.

Strategy raised $2.01 billion through an at-the-market equity sale between August 17 and 23. It also built a $1.59 billion flexible cash reserve, bringing its total dollar assets to $6.69 billion.

The latest financing points to liquidity management rather than immediate accumulation. Strategy’s average purchase price remains $75,385 per BTC, with QCP viewing its cash reserve as support for preferred stock and post-dilution flexibility.

Macro Signals Keep Markets on Edge

Broader macroeconomic signals have also added uncertainty to the market. Minutes from the July Federal Open Market Committee meeting showed a 9-3 vote, with three officials preferring a 25-basis-point rate hike.

Attention now turns to Kevin Warsh’s appearance at Jackson Hole on Friday, although no specific policy guidance has been promised. Treasury Secretary Scott Bessent also announced plans to double the maximum size of long-term Treasury buybacks to $4 billion per operation from September 9.

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The announcement pushed Treasury yields lower and the US dollar to a three-month low. QCP called the buyback plan a liquidity overlay, while the weaker dollar and elevated long-term yields could support Bitcoin and gold amid ongoing fiscal concerns.

Energy markets add another layer of uncertainty. Tensions around Iran and the Strait of Hormuz are raising supply concerns as tanker crossings decline and reserves fall below 300 million barrels.

With jobless claims due Thursday and Warsh speaking Friday, several near-term catalysts remain in focus. Bitcoin could remain range-bound into the September Federal Reserve meeting as markets assess whether current demand can sustain the rally.