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

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 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’s record-breaking price was reached in mid-August after gold remained stagnant for almost two months. 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.

Bitcoins benefit from reduced inflation and increased gold prices

According to analyst estimates, the latest US Personal Consumption Expenditures price index, published Friday, indicated a 2.9% rise 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 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 advance in October has been accompanied by a 16% rise in gold over the past six weeks. data Points to a 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 said that the US President Donald Trump’s policies on trade, immigration, etc. were to blame for this pressure. 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 reduce the sell-off 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. However, today, the BTC options indicators signals a moderate level of fear about 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 (sell futures) positions have been liquidated from Wednesday to Thursday. data. The rally over $120,000 was a surprise to the markets, and this reduces the risk of heavy profits being taken in the futures market if the bullish momentum continues.

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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. 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 trajectory to $125,000 is more likely now that investors are increasingly confident about interest rate cuts coming in the US. Gold’s constant momentum highlights the growing interest among traders in alternatives to traditional equity and bond markets.

The article does not provide legal advice or investment recommendations and it is intended for informational purposes only. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.