Bitcoin rose from around $63,500 to above $80,000 over more than a week. On August 28, QCP Capital stated that this rally was primarily supported by spot buying and short covering, rather than traders continuing to leverage up to chase higher prices.
ETF inflows coinciding with declining holdings
QCP estimate: U.S. spot Bitcoin ETFs attracted a total of approximately $2.8 billion in inflows over eight consecutive trading days during this rally. Meanwhile, the open interest in BTC-denominated futures contracts declined from around 646,000 BTC in mid-August to 588,000 BTC.
This means that as the price of Bitcoin rises, the overall open interest in the futures market is declining. QCP believes this combination is more indicative of spot-driven buying and short covering, rather than a surge of new leveraged long positions. The firm also noted that funding rates remained relatively moderate during the price increase, suggesting the market has not become significantly overheated.
Structurally, this type of rally tends to be more stable than rallies characterized by rapid position growth and continuously rising funding rates, as the latter are more prone to triggering concentrated liquidations during pullbacks. However, a decline in leverage does not guarantee that the upward momentum will continue.
On August 28, it turned into a single-day net outflow.
After nine consecutive trading days of net inflows, U.S. spot Bitcoin ETFs recorded a net outflow of $201.9 million on August 28, marking a significant reversal from the $242.3 million net inflow the previous day. Nevertheless, these funds still posted a combined net inflow of approximately $924.5 million for the week ending August 28.
After weak fund flows, Bitcoin failed to hold above $80,000. Reports show that on August 29, Bitcoin retreated to approximately $77,500, a 2.9% decline over 24 hours, prompting the market to reassess whether the view that spot demand drives price increases still holds.
Daily outflows alone are not enough to indicate that institutional funds have consistently withdrawn. If net outflows continue, support for this rally from spot ETFs will face increased skepticism; if funds shift back to net inflows, it will reinforce the view that spot buying demand remains active.
Inflation and U.S. Treasury repurchase agreements remain external variables.
On a macro level, the U.S. Personal Consumption Expenditures Price Index (PCE) rose 3.7% year-over-year in July, while core PCE increased 3.3% year-over-year—both figures exceeding the Federal Reserve’s 2% target. Both indicators rose 0.2% month-over-month, indicating that the Federal Reserve’s room to ease financial conditions in the near term remains limited.
QCP noted that, prior to the Jackson Hole speech, the market priced in approximately a 35% probability of a 25-basis-point rate hike in September. If interest rate expectations continue to rise, the dollar and U.S. Treasury yields could receive support, putting pressure on Bitcoin.
Another liquidity factor attracting market attention comes from the U.S. Treasury. Starting September 9, the Treasury increased the size of its long-term Treasury buyback operations from a maximum of $2 billion per operation to at least $4 billion per operation, covering securities with maturities of 10 to 30 years, with the program scheduled to continue until November 4. This arrangement aims to improve liquidity in older Treasury issues and is not equivalent to the Federal Reserve’s quantitative easing.
Next, market attention remains focused on two key indicators: whether spot ETFs resume net inflows, and whether open interest gradually recovers while funding rates remain moderate. If prices continue to rise but leverage accumulates rapidly, the risk of increased volatility will also rise.