Bitcoin Rally to $125K: Why?

Takeaways from the conference:

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

• Gold’s growth highlights investors’ desire for alternatives, as the expectation of lower interest rates gains traction.

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 high in August, after nearly two months of gold stagnating near $3400. The global trade tensions at that time were increasing as the United States’ temporary 90-day tariff cut on China imports expired on Aug. 12. Expectations of an inflationary trend were escalating.

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.

The traders who had purchased Bitcoins over $120,000 back in 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 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, vice-chairman of US Federal Reserve Federal Reserve Bank, voiced concerns about the employment market on Monday. “could experience stress” if left unsupported. Jefferson blamed the US president Donald Trump for his trade, immigration and other policies. according Reuters. These effects, he added, are not new. “will further show in coming months,” Traders are encouraged to seek out alternative hedge instruments.

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

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. In today’s market, this same BTC indicator indicates a moderate fear for corrections, as put (sell), and call (buy), options trade at premiums.

CoinGlass reports that between Wednesday and Friday, more than $313 Million in leveraged short positions (sell) Bitcoin Futures were liquidated. 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 successful sale of shares at a valuation record of $500 billion was another factor that reduced 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 trajectory to $125,000 is more likely now that investors are increasingly confident about interest rate reductions coming in the US. Gold’s constant momentum also highlights the growing interest among traders in alternatives to traditional equity and bond markets.

The information contained in this article is meant to provide general knowledge and not as investment or legal advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.