Bitcoin's Holiday Weekend Bounce: Macro Tailwinds, Short Squeeze, and One Big 'But' 🏖️

Bitcoin ($BTC) traded around $63,200 on Monday after climbing above $64,500 intraday, recovering the ground lost during June's final slide and reaching its highest level in over two weeks. The token opened July at a 21-month low of $57,950 on July 1, having closed its worst first half since 2018 and 2022, before staging a sharp reversal during thin July 4 holiday trading. Bitcoin was last seen up roughly 1.4% over 24 hours and about 5.5% on the week, per CoinDesk data.

The rally traces back to Thursday's U.S. Nonfarm Payrolls report, which showed the economy added just 57,000 jobs in June against roughly 113,000 expected, easing rate-hike expectations and pulling Treasury yields lower. Federal Reserve Chair Kevin Warsh added fuel earlier in the week with comments that inflation risks have come down, a softer macro backdrop that traders said reduced the opportunity cost of holding the asset. "Bottom line, any crypto correction is painful, but this one has been rather comforting," analysts at Bernstein wrote. "Crypto feels like it's growing up. We remain optimistic on Bitcoin long-term," they added, reiterating their "ambitious" $150,000 year-end target that would require a roughly 135% rally from current levels.

Market-making firm Wintermute characterized the move as a "textbook relief rally," arguing that "this looks like a textbook relief rally, and it makes sense given the input" of easing macro conditions, a more dovish Fed tone, and improving Ethereum headlines. The firm pointed to easing macroeconomic conditions, a more dovish tone from the Federal Reserve, and improving headlines related to Ethereum and institutional adoption as the trio of variables aiding price action, while cautioning that "until that broader capital flow picture actually turns, this reads as relief rather than something structural."

Spot Bitcoin ETFs provided a key confirmation of the shift. After bleeding a record $4.5 billion in June, the funds posted a $223.5 million net inflow on July 2, snapping a 10-day redemption streak, and added more than $265 million on Monday according to data from Farside Investors. Ether ETFs turned green for two consecutive sessions, adding about $15 million on July 1 and $29 million on July 2. The short side absorbed the brunt of the squeeze, with traders losing over $450 million across the derivatives market as Bitcoin broke through $62,000.

Altcoins led the rebound. Ether ($ETH) climbed about 12.4% over the week to around $1,777, solana ($SOL) added 13.2% to roughly $82.50, dogecoin ($DOGE) gained around 5.5%, and XRP rose nearly 10% on the week to $1.14, overtaking USDC to become the fifth-largest cryptocurrency by market value at about $73 billion. Lighter (LIT) surged more than 50% on the week to $2.50 after its Robinhood integration, and CoinMarketCap's Altcoin Season indicator climbed to 52/100, its highest in three months. The CMC20 index of the top 20 assets rose about 9% over the period. Bernstein's analysts noted that Strategy continues to maintain USD reserve coverage of approximately 17 months for dividend and interest expenses, with any reduction below 12 months requiring board authorization, and added that "it looks unlikely any major Bitcoin forced supply could come from Strategy and it continues to be a net buyer in the market."

The picture is not uniformly bullish. Bitcoin and ether have pulled back roughly 1% since midnight UTC on Monday, diverging from Nasdaq 100 and S&P 500 futures, which rose about 1% and 0.5% respectively after the long weekend. A rebound in semiconductor and technology shares lost steam, South Korea's Kospi fell 1.4%, and the dollar strengthened against all major peers, a headwind crypto has tracked through the past quarter. Bernstein pegged the odds of the Clarity Act's passage by year-end at around 50% according to Polymarket, a development the firm said could unlock "more market liquidity and institutional adoption for both crypto-native assets and blockchain versions of real-world assets," leaving the next move dependent on the upcoming U.S. inflation print and whether the holiday-thin gains hold once full liquidity returns.