Bitcoin Rally to $125K: 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 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 continue to be confident. They note that conditions today are stronger than in mid-August at which time BTC briefly hit $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.

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. The traders were confident that, with inflation no longer being a major concern, the US Federal Reserve would continue to cut interest rates.

Import tariffs did not negatively impact the US retail sales or trade balance in August, which disappointed traders who purchased Bitcoins above that amount. 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 as much as 3.50% in January 2024 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. 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. The same BTC option indicator today signals moderate concern about a correction. Put (sell) and call (buying) options are trading at higher premiums.

CoinGlass reports that between Wednesday and Friday, more than $313 Million in leveraged short positions (sell) Bitcoin Futures were liquidated. data. The rally over $120,000 was a surprise to the markets, and this reduces the risk of profits being taken in the futures market if the bullish momentum continues.

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 trajectory to $125,000 is more likely now that investors are increasingly confident about interest rate reductions in the US. They also perceive a lower risk of stock market fluctuations. Gold’s constant momentum also highlights the growing interest among traders in alternatives to traditional equity and bond markets.

This is not a legal or investment advisory article. It is only intended as a general guide. These are solely the opinions, views, and thoughts of the author and may not reflect the opinions and views of Cointelegraph.