Bitcoin Rally to $125k Possible: Why?

The key takeaways

• A total of $313,000,000 in Bitcoin short positions was liquidated. This signals the beginnings of a squeeze.

• Gold’s growth highlights the need for investors to find alternatives, as rate-cut expectations grow.

BitcoinBTC() flirted at the 121,000 level Thursday, its highest in seven weeks. Bulls are confident and note that the current market conditions are much stronger than mid-August, when BTC briefly reached $124,000.

Bitcoin derivatives indicate that traders have been caught by surprise, which often leads to a short squeeze.

Bitcoin reached a record-breaking high in August, after nearly two months of gold stagnating at $3,400. The global trade tensions at that time were intensifying, as the United States’ temporary 90-day tariff cut on China imports expired on August 12, fuelling expectations of rising inflationary pressure.

Bitcoins benefit from reduced inflation and increased gold prices

In line with analysts’ expectations, the most recent US Personal Consumption Expenditures Index released on Friday showed a 2.9% growth from August. As inflation was no longer seen as an urgent concern by traders, they gained confidence in the US Federal Reserve’s (Fed). They are now confident of further interest rate reductions.

The traders who had purchased Bitcoin above $120,000 during August were disappointed. At least for the near term, import tariffs didn’t negatively affect retail sales in the US or the trade balance. Bitcoin’s September advance coincided with an 16% increase in gold prices within six weeks. data Points to steady accumulation of central banks.

CME FedWatch indicates that implied probabilities of the US Federal Reserve cutting rates below 3.50% by 2024 are now at 40%. In mid-August, they were only 18%. 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,” Traders are encouraged to seek out alternative hedge instruments.

Reduced concerns about AI and Bitcoin derivatives reduces sell-pressure

According to data from derivatives, in the days before Bitcoin reached its all-time peak at mid-August traders priced roughly equal odds for upwards and downwards price movements. Today however, this same BTC Options indicator indicates a moderate fear for corrections, as put (sell), options trade at a higher price than call (buy).

CoinGlass reported that more than 313 million dollars in leveraged Bitcoin short positions (buy) were liquidated on Wednesday and Thursday. data. It is further confirmation that markets were caught off guard by the recent rally of the dollar above $120,000, which reduces the possibility of heavy profits being taken in futures markets as long as the momentum remains bullish.

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OpenAI’s record share sale for $500 billion was also a factor in easing the short-term risks. After US export restrictions for advanced AI chip to China as well as Meta’s decision of freezing hiring, the artificial intelligence sector was facing increased scrutiny.

Bitcoin’s rise to $125,000 or higher is becoming more plausible as investors show greater confidence in an interest rate cut in the US. They also perceive less risk in a correction of the stock market. Gold’s constant momentum is a sign of traders’ preference for alternative markets to the traditional equity and bond 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.