Bitcoin Price Eyes $125,000 Amid Short Squeeze Speculation

Bitcoin hovered around $74,700 on Friday morning in Asia, down 0.4% over the past day but up 3.5% for the week, as the global equity rally paused ahead of the U.S.-Iran ceasefire deadline. Ether retreated 1.4% to $2,327 but maintained its weekly lead among major cryptocurrencies with a 6% gain. Other notable performers included XRP, which held steady at $1.43 with a 6.4% weekly increase, solana, which rose 2.7% to $87.67, BNB, which added 0.7% to $629.89, and dogecoin, which climbed 5.6% for the week to $0.0976. The MSCI All Country World Index reached a record high on Thursday before dipping 0.1% in Asian trading, while the S&P 500 also attained an all-time high. Brent crude fell 1.2% to $98.20 following President Donald Trump's statement that a permanent Iran ceasefire was 'looking very good,' although Tehran has not confirmed any concessions. A separate 10-day ceasefire between Israel and Lebanon was announced, with Israeli Prime Minister Benjamin Netanyahu confirming the truce. Despite the geopolitical developments, markets appear to be pricing in a deal, leading to a partial unwinding of the war premium in equities, while crude oil remains near $98 and the Strait of Hormuz is still effectively closed. However, some traders are focusing on the underlying dynamics in the bitcoin market. Bitcoin's perpetual funding rates have turned deeply negative, reaching levels last seen in 2023, indicating that the market is heavily short. When funding rates are negative, it means that shorts are paying longs, which typically occurs when the market is heavily positioned against the price. According to Daniel Reis-Faria, CEO of ZeroStack, 'Funding rates this negative tell you the market is heavily short. If Bitcoin continues to move higher despite that, a lot 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. On the other hand, 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, prolonged periods below the True Market Mean have coincided with bitcoin's worst periods, including the 2018-19 bear market and the 2022-23 downturn. These two perspectives do not have to be mutually exclusive, as a short squeeze triggered by negative funding and a structural drawdown from underwater holders can both occur, with the former potentially leading to an outsized rally that is eventually sold into by the latter. The dominant scenario likely depends on whether the U.S.-Iran ceasefire extension holds beyond next week.