TLDR
- Bitcoin touched $121,000 on Thursday, its highest level in seven weeks, as the cryptocurrency continues its October rally
- Over $313 million in bearish Bitcoin positions were liquidated between Wednesday and Thursday, catching traders off guard
- Gold rallied to a new all-time high above $3,900, with JPMorgan analysts suggesting Bitcoin looks undervalued relative to gold on a volatility-adjusted basis
- The Federal Reserve is expected to cut rates again in October with a 98% probability, following September’s first cut in four years
- Combined Bitcoin and Ethereum ETF inflows reached nearly $2.4 billion this week, showing strong institutional demand
Bitcoin flirted with the $121,000 level on Thursday, marking its highest point in seven weeks. The move comes as multiple factors align to push the cryptocurrency higher.
The rally caught many traders by surprise. More than $313 million in leveraged short positions were liquidated between Wednesday and Thursday, according to CoinGlass data. This type of forced buying often creates conditions for further price increases.
Bulls remain confident that current conditions are stronger than they were in mid-August when Bitcoin briefly touched its all-time high of around $124,000. The cryptocurrency has now recovered most of the ground lost since that peak.
Gold’s performance has played a supporting role in Bitcoin’s advance. The precious metal hit a fresh all-time high above $3,900 on Thursday after rallying 16% over the past six weeks. World Gold Council data shows central banks have been steadily accumulating gold during this period.
Analysts at JPMorgan said Bitcoin appears undervalued relative to gold on a volatility-adjusted basis. The bank’s analysis implies potential upside toward $165,000 by year-end.
The US Personal Consumption Expenditures Price Index, released Friday, showed a 2.9% increase from August. The figure matched analyst forecasts and eased concerns about inflation becoming a pressing issue again.
With inflation data meeting expectations, traders gained confidence that the Federal Reserve would continue cutting interest rates. The CME FedWatch tool shows a 98% probability of another quarter-point cut at the Fed’s October meeting.
The implied probability of rates falling to 3.50% or below by January 2026 now stands at 40%. This compares with just 18% in mid-August when Bitcoin last approached current levels.
Federal Reserve Officials Signal Concerns
US Federal Reserve Vice Chair Philip Jefferson voiced concern over the labor market on Monday. He warned that it “could experience stress” if left unsupported, according to Reuters.
Jefferson attributed the pressure to US President Donald Trump’s trade and immigration policies. He added that these effects “will further show in coming months.”
The US government entered a partial shutdown on October 1 after lawmakers failed to reach a funding deal. However, history suggests shutdowns aren’t necessarily bearish for markets.
The S&P 500 has advanced during every government closure since 1990. With Bitcoin tracking the stock index more closely than ever in 2025, similar dynamics may be supporting crypto prices.
ETF Inflows and October Seasonality
Combined Bitcoin and Ethereum ETF inflows reached nearly $2.4 billion this week. The strong institutional demand comes as both cryptocurrencies extend their October gains.
On October 2 (ET), spot Bitcoin ETFs recorded a net inflow of $627 million, marking four consecutive days of inflows. Spot Ethereum ETFs saw a net inflow of $307 million, also with four straight days of inflows.https://t.co/Hj2Gs49bWa pic.twitter.com/CVBoNasftk
— Wu Blockchain (@WuBlockchain) October 3, 2025
October has historically been Bitcoin’s strongest month. The cryptocurrency has averaged gains of more than 14% during October since 2013.
Ethereum has also benefited from the improved market conditions. The second-largest cryptocurrency has been hovering above $4,500, its strongest level in three weeks.
Crypto-related stocks are participating in the rally. Shares of Coinbase rose by more than 7%, while Bullish and Circle gained 11% and 16% respectively.
Bitcoin options data shows traders are currently pricing a moderate fear of correction. Put options are trading at a premium compared with call options, according to data from Deribit tracked by Laevitas.ch.
This contrasts with mid-August when traders were pricing roughly equal odds of upward and downward price moves. The current setup suggests less aggressive positioning among derivatives traders.
John Haar, managing director at Swan Bitcoin, said the market is seeing a shift from speculative trades to strategic allocations. Retail investors have been pouring into gold and Bitcoin as a hedge against deficits and inflation.
OpenAI’s successful share sale at a record $500 billion valuation also helped ease short-term market concerns. The AI sector had faced scrutiny following US export restrictions on advanced chips to China and Meta’s decision to freeze hiring in its AI division.
