Bitcoin prices may surge to $125,000 as US-Iran peace talks boost investor sentiment

Bitcoin's price hovered around $74,700 during Asian morning trading on Friday, experiencing a minor 0.4% decline over 24 hours but still maintaining a 3.5% weekly gain, as the 10-day global equity rally paused ahead of the impending US-Iran ceasefire deadline. Meanwhile, ether dropped 1.4% to $2,327 but continued to lead major cryptocurrencies with a 6% weekly increase, extending its outperformance from earlier in the week. Other notable gains included XRP, which held steady at $1.43 with a 6.4% weekly increase, solana rising 2.7% to $87.67, BNB adding 0.7% to $629.89, and dogecoin surging 5.6% on the week to $0.0976. The MSCI All Country World Index reached a record high on Thursday before slipping 0.1% in Asia, while the S&P 500 also achieved an all-time high. However, Brent crude fell 1.2% to $98.20 following President Donald Trump's statement that a permanent Iran ceasefire was 'looking very good,' despite lacking evidence. Trump claimed that Tehran had agreed to abandon its nuclear ambitions, surrender nuclear materials, and reopen the Strait of Hormuz as part of the deal, although Iran has not confirmed these concessions. A separate 10-day ceasefire between Israel and Lebanon was announced on Thursday, with Israeli Prime Minister Benjamin Netanyahu confirming the truce in a video message. Markets are reacting to the news as if a deal is imminent, leading to the unwinding of most war-related premiums in equities, while crude oil remains near $98 and the Strait of Hormuz remains effectively closed. However, some traders are focused on the underlying dynamics driving bitcoin's price. Bitcoin's perpetual funding rates have turned deeply negative, reaching levels last seen in 2023, indicating that the market is heavily positioned against the price. When funding rates are negative, shorts are paying longs, which only occurs when the market is heavily biased against the price. According to Daniel Reis-Faria, CEO of ZeroStack, 'Funding rates this negative indicate that the market is heavily short. If bitcoin continues to rise despite this, many of these positions could be liquidated, and the price movement can accelerate quickly.' Reis-Faria predicts that bitcoin could reach $125,000 in the next 30 to 60 days if the short positions are 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 by filtering out lost and dormant coins, 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 following the Luna and FTX collapses. These two perspectives do not necessarily conflict, as a short squeeze triggered by negative funding and a structural drawdown from underwater holders can both be true, 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 US-Iran ceasefire extension holds beyond next week.