Crypto momentum returns, but can the rally last?

Bitcoin hits eight-month high, market reclaims $3 trillion

After months of subdued sentiment, crypto seems to have found some momentum again. Bitcoin has surged nearly 10% this month, climbing above $87,400 to an eight-month high and helping push the broader crypto market back above $3 trillion for the first time since January. Ether has also joined the recovery, gaining around 14% over the past week and testing the 2,800 level as momentum broadens across the crypto market.

More notable is the scale of the recovery, with Bitcoin up around 47% in Q3 so far, putting it on track for its strongest quarterly performance since the post-US election rally of Q4 2024. The turnaround has been particularly sharp since mid-August, with Bitcoin gaining around 35% since August 19 and finally breaking through the $80,000 ceiling that had largely capped prices for most of the year.

Institutional demand returns

A key pillar of the recovery has been the return of investors to US spot Bitcoin ETFs. Following persistent redemptions earlier this year, flows have now swung positive for 2026, with around $4.6 billion entering the funds since August 19 and year-to-date net inflows reaching roughly $320 million. Nearly $1 billion flowed in on Monday, followed by around $715 million on Tuesday, offering stronger evidence that spot-linked demand is accompanying the recovery.  Ether has seen more modest but improving demand, with US spot Ether ETFs attracting around $576 million over three consecutive sessions

The timing is particularly relevant around current levels. The average cost of Bitcoin held by US spot ETFs has been estimated to be near $82,000, putting aggregate holders back in unrealised profit. For traders, that places the broader 80,000-85,000 region in focus: sustained ETF demand could help underpin the recovery, while renewed outflows would weaken one of the rally’s clearest sources of support. Adding to institutional demand, Strategy, the largest corporate Bitcoin holder, returned after a three-week pause with a $75.7 million purchase.

Broader catalysts fall into place

Broader risk appetite has also improved amid the AI-led equity rally and, more recently, falling oil prices. Further, regulatory uncertainty has eased somewhat despite the Clarity Act setback, with the SEC and CFTC pressing ahead with digital-asset rules. The SEC’s five-year exemption for qualifying tokenised stock platforms could compete for speculative capital but also broaden onchain participation, while the CFTC has submitted proposed crypto-market rules for White House review. The wider ecosystem is also attracting investment, with Binance investing $100 million in the largest stablecoin issuer, Circle, and extending its USDC partnership for five years, reinforcing the continued expansion of stablecoin and onchain infrastructure.

But the key turning point came on August 19, when the US Treasury announced an expansion of long-dated bond buybacks. The announcement helped ease pressure on longer-term yields and broader financial conditions. Since then, the crypto market has added more than $740 billion in value.

The resilience is particularly notable given two major hurdles last week: the Clarity Act failing to advance in the Senate and the Fed’s 25-basis-point rate hike. Bitcoin weathered both, suggesting stronger demand has so far outweighed concerns over delayed regulatory clarity. Still, restrictive monetary conditions remain a counterweight. For a market stuck in the doldrums for much of the past year, rebuilding conviction may take more than a rapid rally, particularly as momentum has cooled.

Leverage builds, but can the rally last?

That conviction is being tested by increasingly aggressive derivatives positioning. Open interest in crypto perpetual futures has climbed towards $160 billion, its highest since late October 2025. More than $920 million in bearish positions were liquidated on Monday, accelerating the move higher, yet open interest continued to rise.

That combination is worth watching. Rather than leverage disappearing as shorts are squeezed out, rising open interest suggests fresh leveraged exposure is replacing positions being forced out. If leverage continues to run ahead of underlying spot demand, even a modest reversal could trigger long liquidations and amplify downside volatility. Conversely, renewed upside could force remaining shorts out and extend the rally.

Encouragingly, ETF inflows show that spot-linked demand is accompanying the leverage build. Whether those flows persist could prove crucial in determining whether the recovery has staying power.

BTC/USD weekly breakout tested as momentum cools 

The weekly structure remains constructive despite the retreat from recent highs. BTCUSD has cleared its 50-week SMA near $78,150 and former resistance around 81,000, leaving this zone as key support. The weekly RSI near 64 remains below overbought territory. Holding above the 50-week SMA keeps 90,000 in focus, with a break higher exposing the yearly highs around $98,000. Conversely, a move below it would weaken the breakout and bring $75,000, back into focus.