Bitcoin Rally to $125K: Why?

The key takeaways

• More than $313 Million in Bitcoin Bearish Positions were Liquidated, Signaling Conditions for Short Squeeze.

• Gold’s surge highlights the search for alternative investments as expectations of interest rate cuts gain momentum.

BitcoinBTC() was at its highest level in 7 weeks on Thursday when it flirted near the 121,000 mark. Bulls continue to be confident. They note that conditions today are stronger than in mid-August at which time BTC briefly hit $124,000.

Bitcoin derivatives show that, beyond easing fears of recession and the gold’s support momentum, traders were taken off-guard, creating the perfect conditions for a market short squeeze.

Bitcoin’s record-breaking price was reached in mid-August after gold had been stuck at $3,400 near the end of July. Global trade tensions intensified at the time as the 90-day temporary tariff cut by the United States on China imports expired on August 12. This fueled expectations of inflationary pressure.

Bitcoin gains are favored by reduced inflation risk and the gold return

In line with analysts’ expectations, the most recent US Personal Consumption Expenditures Index released on Friday showed a 2.9% growth from August. The traders were confident that, with inflation no longer being a major concern, the US Federal Reserve would continue to cut interest rates.

Import tariffs did not negatively impact the US retail sales or trade balance in the short-term, which disappointed traders who purchased Bitcoins above $120,000. Bitcoin’s September advance coincides with an 16% increase in gold prices within six weeks. data Points to the steady accumulation of central banks.

CME FedWatch indicates that implied probabilities of the US Federal Reserve cutting rates below 3.50% by January 2024 have increased to 40% from 18% mid-August. Investors may welcome inflation’s current trajectory, but ongoing labor market weakness could challenge the recent S&P 500 all-time high, particularly amid uncertainty tied to the US government shutdown.

Philip Jefferson, the Vice-Chairman of the US Federal Reserve, expressed concern about the state of labor on Monday. “could experience stress” if left unsupported. Jefferson blamed the US president Donald Trump for his trade, immigration and other policies. according Reuters. He said that the effects of these changes are also reflected in his comments. “will further show in coming months,” The need for hedges is driving traders to find alternatives.

Sell pressure is reduced by the Bitcoin derivatives market and reduced AI sector worries

Data from derivatives shows that traders had roughly the same odds on both upward and downward movements in the three days prior to Bitcoin hitting its high point at mid-August. The BTC Options indicator, which signals the fear of a possible correction today, shows a slight increase in put options (sell), compared to call options (buy).

CoinGlass reports that between Wednesday and Friday, more than $313 Million in leveraged short positions (sell) Bitcoin Futures were liquidated. data. The rally over $120,000 was a surprise to the markets, and this reduces the risk of large profit taking in the futures market if the bullish momentum continues.

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OpenAI’s successful sale of shares at an unprecedented $500 billion valuation eased the short-term risks. Artificial intelligence was under increased scrutiny after US restrictions on exports of advanced AI chips to China, and Meta’s announcement to freeze its AI hiring.

Bitcoin’s rise to $125,000 or higher is becoming more plausible as investors show greater confidence in the US interest rate cut and perceive less risk in a correction of the stock market. The steady growth of gold highlights the growing interest among traders in alternatives to traditional bonds and equity markets.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.