Main Points:
- Risk-On Sentiment Intensifies: CBOE VIX falls to 20 after U.S.–China trade deal, driving investors into Bitcoin and other risk assets.
- Inflation Cooling Bolsters Outlook: April CPI drops to 2.3%, strengthening Fed rate-cut expectations and improving macro backdrop.
- On-Chain Sentiment Soars: Bitcoin Bull Score Index jumps from 20 to 80, and Fear & Greed Index rises to 53, indicating room for further upside.
- Stablecoin Liquidity & Funding Dynamics: Record stablecoin market cap and negative Bitcoin funding rates set the stage for a potential short squeeze.
- Institutional Adoption & ETF Flows: Continued inflows into spot Bitcoin ETFs and growing corporate treasury allocations support sustained demand.
- Model-Driven Price Target: Analyst Timothy Peterson’s VIX-based model, with 95% historical accuracy, forecasts BTC at $135K if volatility remains low.
Risk-On Sentiment Fuels Bitcoin’s Rally
On May 12, 2025, the U.S. and China agreed to suspend tariffs for 90 days and cut duties by 115% on selected goods. This breakthrough rekindled risk appetite across global markets, pushing the CBOE Volatility Index (VIX) down from a 2025 peak of 60 to its 30-year average of 20. Bitcoin, trading above $100,000, has been an immediate beneficiary of this “risk-on” shift, as investors rotate capital into high-beta assets like cryptocurrencies.
Timothy Peterson, a leading Bitcoin network economist, highlighted on X that the VIX’s descent into “normal” territory typically correlates with increased flows into speculative assets. He asserted, “A low VIX reduces uncertainty, encouraging investment in riskier assets,” reinforcing the bullish case for Bitcoin in this climate.
Inflation Cooling Strengthens Fed Rate-Cut Prospects
April’s U.S. Consumer Price Index (CPI) reading came in at a 2.3% year-over-year increase—the lowest since February 2021 and below the 2.4% March figure and consensus forecasts. This unexpected moderation in inflation underpins growing market expectations that the Federal Reserve will begin cutting interest rates later in 2025, assuming other economic indicators remain favorable. Lower borrowing costs historically support risk asset rallies, and Bitcoin’s performance has frequently mirrored shifts in monetary policy sentiment.
On-Chain Sentiment Hits Extreme Bullishness
According to CryptoQuant data, Bitcoin’s Bull Score Index rose dramatically from 20 to 80 in early May 2025, marking the strongest bullish sentiment observed all year. This indicator aggregates metrics such as active addresses, exchange flows, and derivatives positioning, and past readings at or above 80 have aligned with significant price surges.
Similarly, the Crypto Fear & Greed Index climbed to 53.3%, moving further into optimistic territory yet still below “overheated” levels around 80. Researcher Axel Adler Jr. noted that the current index level suggests there remains room for sentiment to heat up further before triggering cautionary signals.
Stablecoin Liquidity & Funding Rate Dynamics
Beyond volatility and sentiment, on-chain liquidity provides another tailwind. The stablecoin market capitalization recently surpassed $220 billion, reflecting ample dry powder ready to deploy into digital assets when opportunities emerge.
At the same time, Bitcoin’s perpetual futures funding rate has turned negative, indicating that short-sellers are paying long-position holders. A sustained negative funding rate often precedes a short squeeze, where shorts rush to cover positions, amplifying price spikes—another bullish catalyst for Bitcoin’s near-term outlook.
Institutional Adoption and ETF Inflows Sustain Demand
Institutional interest in Bitcoin remains robust. Spot Bitcoin ETFs have accumulated over $36 billion in inflows since their launch in early 2024, according to Investopedia reporting. Bitwise projects that continued ETF inflows could propel Bitcoin beyond $200,000 by year-end if similar trends persist.
Corporate treasury allocations have also gained traction. Several public companies and hedge funds are diversifying balance sheets with Bitcoin, viewing it as both an inflation hedge and a portfolio diversifier. This structural demand underpins longer-term price support beyond purely technical market drivers.
Model-Driven Price Target: $135,000 in 100 Days
Earlier this month, Peterson published a model linking Bitcoin’s price to the VIX, demonstrating a 95% historical correlation between low volatility regimes and subsequent BTC price rallies. Based on the VIX’s decline from 55 to 25, his analysis forecasts Bitcoin reaching $135,000 within 100 days if the VIX remains below 18.
This target aligns with other macro-chart analyses highlighting breakouts when volatility contracts and liquidity metrics expand. While no model is infallible, the confluence of lower volatility, easing inflation, record stablecoin liquidity, and institutional demand presents a compelling case for significant upside in the coming months.
Conclusion
A confluence of macroeconomic improvements and on-chain signals is forming a powerful bullish case for Bitcoin. The U.S.–China trade détente has eased global market volatility, April’s soft CPI print has bolstered rate-cut expectations, and key sentiment indicators have surged to levels historically associated with price rallies. At the same time, record stablecoin liquidity and negative funding rates set the stage for a potential short squeeze, while spot ETF inflows and corporate treasury interest provide structural demand. Taken together, these factors support the forecast that Bitcoin could reach $135,000 within 100 days, as modeled by Timothy Peterson with an impressive 95% track record.
