Bitcoin (BTC) Rally Driven by Short Covering, Not Fresh Leverage: QCP

Bitcoin has gained almost 23% over the past month, but a few choppy sessions briefly dragged the asset below $76,500. BTC has since stabilized above $77,700 following a minor 1.4% surge on Thursday.

The latest uptick came mainly from short covering rather than a fresh increase in leverage, according to QCP Capital, as markets continued to face a firm Federal Reserve stance.

Fragile Positioning?

Kevin Warsh reinforced the Fed’s focus on maintaining a 2% PCE inflation target, while headline PCE remains at 3.7%. This leaves little visible support for near-term rate cuts. Treasury long-end buybacks were doubled to $4 billion quarterly, but QCP said the amount represents only 0.013% of the $31.5 trillion Treasury market, which points to liquidity support rather than a policy pivot.

Heavy long-dated investment-grade issuance is also adding pressure, as technology companies account for 38% of 10-year-plus supply. Additionally, ETF inflows near the 95th percentile indicate genuine spot demand, although MSTR’s Bitcoin accumulation was funded through equity issuance.

“With policy guidance scarce and liquidity narrow, is this conviction or fragile positioning?”

Meanwhile, analyst NoName said that Bitcoin’s next major move could depend on whether it can close above $83,000. The analyst is also watching a CME futures gap above the current price and sees it as an important level separating a genuine reversal from another relief rally. A daily close above the level, supported by strong spot volume, would be needed to confirm a new uptrend.

Without that confirmation, NoName said that the recent bounce was a retest of previous supply. They warned that a rejection at $83,000 followed by a break below $74,000 could send the crypto asset toward $50,000-$55,000.

CryptoPatel also flagged the exact level and said that Bitcoin could face further losses if it fails to reclaim it with a higher-timeframe candle close. In that scenario, the analyst expects potential declines toward $70,000, $65,000, and $60,000. If the bearish market structure remains intact, the crypto asset could eventually fall toward the $50,000-$40,000 range. However, a higher-timeframe close above the $83,000 level would invalidate the bearish setup.

Another market watcher, Rain, noted that Bitcoin is starting to lose the demand support that helped the August rally.

The Case for Further Upside

Not everyone sees further downside ahead. Doctor Profit, for one, reiterated his stance that the bear market is over. He had previously stated that BTC broke out above key resistances and entered the Soft Bull Market, which he expects to turn into a full bull market escalation.

“Many desperate investors that wish for a lower Bitcoin price, some even call for a new low, and others say the bear market isn’t over. In fact, and I say it with my full conviction, I consider the bear market as over!”

More on the current market state can be found in our latest video below.