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.

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 conditions often for a market short squeeze.

Bitcoin’s record-breaking price was reached in mid-August after gold had been stuck at $3,400 near the end of July. 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 inflationary forces were escalating.

Bitcoin is 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. 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 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 indicates that implied probabilities of a US Federal Reserve rate cut to below 3.50% by 2024 are now at 40%. In mid-August, they were only 18%. 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,” Traders are encouraged to seek out alternative hedge instruments.

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

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. Today however, this same BTC Options indicator indicates a moderate fear for 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 rise to $125,000 or higher is becoming more plausible as investors show greater confidence in forthcoming interest rate reductions in the US. They also perceive less risk in a market correction. Gold’s constant momentum shows traders’ preference for alternative markets to the traditional equity and bond markets.

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