Bitcoin Prices May Surge to $125,000 as Short Positions Fuel Rally

Bitcoin prices hovered around $74,700 on Friday morning, experiencing a minor 0.4% drop over the past day but maintaining a 3.5% weekly gain, as the global equities rally paused ahead of the upcoming US-Iran ceasefire deadline. Ether slipped 1.4% to $2,327, yet still led the major cryptocurrencies with a 6% weekly increase. Other notable gains included XRP at $1.43 with a 6.4% weekly rise, solana at $87.67 with a 2.7% increase, BNB at $629.89 with a 0.7% gain, and dogecoin at $0.0976 with a 5.6% weekly increase. The MSCI All Country World Index reached a record high on Thursday before dipping 0.1% in Asia, while the S&P 500 also hit an all-time high. Meanwhile, Brent crude prices fell 1.2% to $98.20 following President Donald Trump's statement that a permanent Iran ceasefire was 'looking very good.' However, Tehran has not confirmed the alleged concessions, including abandoning nuclear ambitions and reopening the Strait of Hormuz. A separate 10-day ceasefire between Israel and Lebanon was announced, with Israeli Prime Minister Benjamin Netanyahu confirming the truce. Markets are reacting to the news as if a deal is imminent, resulting in equities shedding most of their war premium while crude oil remains near $98 and the Strait of Hormuz remains closed. Beneath the stagnant bitcoin price, traders are focused on the setup. Bitcoin perpetual funding rates have turned deeply negative, reaching levels last seen in 2023. This indicates that the market is heavily short-biased, with shorts paying longs to keep contract prices aligned with spot prices. According to Daniel Reis-Faria, CEO of ZeroStack, 'Funding rates this negative signify a market heavily positioned against price. If bitcoin continues to rise despite this, many of those positions could get liquidated, and the move can accelerate quickly.' Reis-Faria predicts that bitcoin could reach $125,000 in the next 30 to 60 days if the short base gets squeezed out. In contrast, on-chain analyst CryptoVizArt notes that bitcoin's 'True Market Mean,' which estimates the average cost basis of active investors, suggests that the average active holder is currently underwater. Historically, meaningful stretches below the True Market Mean have coincided with bitcoin's worst periods, including the 2018-19 bear market and the 2022-23 unwind. Both scenarios can coexist, with a short squeeze potentially triggering an outsized rally that ultimately gets sold into by underwater holders. The dominant scenario likely depends on whether the US-Iran ceasefire extension holds past next week.