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 the perfect conditions for a market 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. 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.

Import tariffs did not negatively impact the US retail sales or trade balance in the short-term, which disappointed traders who purchased Bitcoins above $120,000. Bitcoin’s September advance coincides with an 16% increase in gold prices within six weeks. data The central bank accumulation is steady.

CME FedWatch indicates that implied probabilities of the US Federal Reserve cutting rates 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, the Vice-Chairman of the US Federal Reserve, expressed concern about the state of labor 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.

Reduced concerns about AI and Bitcoin derivatives reduces sell-pressure

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. 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), options.

CoinGlass reports that between Wednesday and Friday, more than $313 Million in leveraged short positions (sell) Bitcoin Futures were liquidated. 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 major profit taking in the futures markets.

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OpenAI’s successful sale of shares at a valuation record of $500 billion was another factor that reduced short-term risks. After US export restrictions for advanced AI chip to China as well as Meta’s decision of freezing hiring, the artificial intelligence sector was facing increased scrutiny.

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. 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. This article is solely for informational purposes. It does not represent or reflect Cointelegraph’s views.