Bitcoin Rally Fades as Short Covering Loses Steam

QCP Research warns that Bitcoin's recent rally could lose steam as short covering fades. According to the firm, the rally has been driven partly by short covering rather than fresh leveraged positions. Open interest in BTC has fallen even as strong spot ETF inflows have added demand.

The spot demand is also strengthening, with QCP noting that ETF inflows are nearing the 95th percentile of the past year. This means they are at a level seen only once every nine months on average.

However, QCP warns that if short covering loses momentum and new demand does not replace it, the rally could become more fragile.