Is Bitcoin's Recent Surge a Bubble or a Healthy Bubble?

In cryptocurrency markets, Bitcoin's ($BTC) recent surge from around $63,500 to over $80,000 is claimed to have been supported by strong spot demand, rather than leveraged trading.

According to an assessment published by QCP Capital, the current structure of the Bitcoin market appears healthier than previous speculative rallies. The firm states that during the rise from $63,500, spot Bitcoin ETFs saw approximately $2.8 billion in net inflows.

In contrast, open interest in Bitcoin futures decreased from about 646,000 $BTC in mid-August to 588,000 $BTC. The fact that funding rates remain at relatively low levels also suggests the price increase is not driven by aggressively used leverage to open long positions.

QCP stated that these data indicate the rally was particularly characterized by spot buying and short-covering. This may point to a more sustainable Bitcoin market structure due to limited accumulation of excessive leverage.

In the macroeconomic sphere, close attention is being paid to the Federal Reserve and the U.S. Treasury Department.

Despite Bitcoin's positive market technical structure, macroeconomic prospects remain uncertain. Although core PCE inflation in July remained at 3.3% year-on-year, markets are pricing in a 35% probability of the Federal Reserve raising interest rates by 25 basis points at its September meeting.

On the other hand, the expansion of the U.S. Treasury's bond buyback program, aimed at maintaining the liquidity of long-term bonds, is one factor supporting risk assets.

The Treasury Department announced that starting September 9, it will increase the upper limit for buyback operations of bonds with maturities from 10 to 30 years from $2 billion to at least $4 billion. Following this announcement, long-term bond yields fell, the dollar index weakened, while gold and Bitcoin prices rose.

QCP also noted that Nvidia's solid financial performance has contributed to increased risk appetite in global markets.

However, it should be noted that the U.S. Treasury's bond buyback program is not quantitative easing (QE). The program's goal is to improve liquidity conditions in the long-term bond market, not to directly dictate bond yields, and it does not lead to an expansion of central bank reserves similar to QE.

According to QCP's assessment, the key short-term question for Bitcoin will be whether the high spot demand persists.

*This is not investment advice.