Bitcoin Rally Up to $125K is Possible: This Is Why

The key take-aways

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

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

BitcoinBTCOn Thursday it flirted near the $121,000 mark, which was its highest level in 7 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 show that, beyond easing fears of recession and the gold’s support momentum, traders were taken off-guard, creating a situation which can often lead to a market 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 escalating as the United States’ temporary 90-day tariff cut on China imports expired on August 12, which fueled fears of inflation.

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

According to analyst estimates, the latest US Personal Consumption Expenditures price index, published Friday, indicated a 2.9% rise 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 advance in October has been accompanied by a 16% rise in gold over the past 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, the Vice-Chairman of the US Federal Reserve, expressed concern about the state of labor on Monday. “could experience stress” if left unsupported. Jefferson said that the US President Donald Trump’s policies on trade, immigration, etc. were to blame for this pressure. according Reuters. These effects, he added, are not new. “will further show in coming months,” The need for hedges is driving traders to find alternatives.

Reduced concerns about AI and Bitcoin derivatives reduce sell-pressure

Data from derivatives shows that traders had roughly the same odds on both upwards and downwards movements in the three days prior to Bitcoin hitting its high point at mid-August. 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.

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OpenAI’s record-breaking share sale of $500 billion at an open market valuation was another factor that eased short-term risk. After US restrictions were imposed on the export of advanced AI chip to China as well as Meta’s decision not to hire in their AI division, there was increased scrutiny for the artificial intelligence industry.

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.

This is only 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.