Bitcoin Rally Up to $125K: This is Why

Takeaways from the conference:

• More than $313 Million in Bitcoin Bearish Positions were Liquidated, Signaling Conditions for Short 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 high in August, after nearly two months of gold stagnating near $3400. Global trade tensions were increasing at the time as the 90-day temporary tariff reduction for China by the United States ended 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.

The traders who had purchased Bitcoin above $120,000 during August were disappointed. At least for the short-term, import tariffs didn’t negatively impact US retail sales and 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 shows that the implied probability for the US Federal Reserve to lower rates by January 2024 to 3.5% or less is now 40%. This was 18% at 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. 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.

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. The same BTC option indicator today signals moderate concern about a correction. Put (sell) and call (buying) options are trading at higher premiums.

CoinGlass reported that more than 313 million dollars in leveraged Bitcoin short (sell futures) positions have been liquidated from Wednesday to 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 losses in futures markets should the momentum remain bullish.

Related: Bitcoin on TV: How shows like South Park influence crypto

OpenAI’s record-breaking share sale of $500 billion at an open market valuation was another factor that eased short-term risk. 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 upcoming interest rate reductions in the US. They also perceive less risk in a market correction. The steady growth of gold highlights the growing interest among traders in alternatives to traditional bonds and equity markets.

This is a general article and not intended as investment or legal advice. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.