Bitcoin Bulls Set Sights on $125,000 Amid Risk-On Sentiment and Short Squeeze Potential

Bitcoin was trading at approximately $74,700 during Asian morning hours on Friday, experiencing a minor 0.4% decline over 24 hours but still maintaining a 3.5% weekly gain, as the 10-day global equities rally paused ahead of the U.S.-Iran ceasefire deadline next week. 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 movements included XRP holding at $1.43 with a 6.4% weekly gain, solana rising 2.7% to $87.67, BNB adding 0.7% to $629.89, and dogecoin increasing 5.6% on the week to $0.0976. The MSCI All Country World Index reached a record high on Thursday before dipping 0.1% in Asia, while the S&P 500 also achieved an all-time high. Brent crude decreased 1.2% to $98.20 following President Donald Trump's statement that prospects for a permanent Iran ceasefire were 'looking very good,' although he provided no evidence and Iran 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. Markets are reacting to these developments as if a deal is closer than it actually is, contributing to equities shedding most of their war premium while crude remains near $98 and the Strait of Hormuz remains effectively shut. However, some traders are focused on the underlying setup, particularly the deeply negative bitcoin perpetual funding rates, which have reached levels last seen in 2023. These negative funding rates indicate that shorts are paying longs, a situation that only 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 suggests that bitcoin's 'True Market Mean,' which estimates the average cost basis of active investors, indicates that the average active holder is currently underwater. Historically, meaningful stretches below the True Market Mean have aligned with bitcoin's worst periods. These two perspectives do not necessarily conflict, as a short squeeze from negative funding and a structural drawdown from underwater holders can both be true, with the former potentially triggering 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 past next week.