Bitcoin Hits $125K as USD Suffers Worst Year Since 1973

• Bitcoin surges to $125,000, spurred by inflation and USD weakness.
• Analysts cite policy shifts and rare asset correlations behind the rally.

Bitcoin shattered records on October 5, 2025, hitting $125,000, driven by historic USD depreciation and a macroeconomic environment nearing a generational shift. The increase reflects significant investor shifts influenced by monetary policy changes, asset correlations, and political instability.

Cointelegraph reported on October 5, 2025, that Bitcoin’s surge coincided with a weakening U.S. dollar, which is on track for its worst year since 1973. Analysts from The Kobeissi Letter noted that the dollar’s purchasing power has fallen by 40% since 2000, prompting investors to seek alternative assets such as Bitcoin. The dollar has already recorded a year-to-date decline of over 10%.

Inflation and changes in U.S. Federal Reserve policies remain key drivers of this trend. The Federal Reserve has initiated interest rate cuts in response to inflation showing signs of rebounding, further stressing the dollar and enhancing the appeal of non-traditional stores of value. Cointelegraph highlighted that this monetary easing is drawing investors to Bitcoin, which is widely regarded as a hedge against inflation and currency devaluation.

Emerging correlations between traditionally distinct asset classes are also reshaping investment strategies. While the S&P 500 has seen a remarkable 40% rise in the past six months, gold prices recently hit all-time highs near $4,000 per ounce. Analysts have observed a record-breaking correlation coefficient of 0.91 between gold and the S&P 500 in 2024, signaling a widespread shift in asset allocation. These trends underscore an increasing preference for Bitcoin as investors diversify across asset classes.

Political and economic instability has further eroded confidence in traditional systems, driving interest in decentralized assets like Bitcoin. The ongoing U.S. government shutdown has heightened concerns about governance credibility, while significant downward revisions in U.S. labor market data indicate potential economic weakening. Fabian Dori, Chief Investment Officer at Sygnum, characterized this political dysfunction as a critical driver behind Bitcoin's ascent, describing it as a "store-of-value technology."

Analysts across the board agree that Bitcoin’s rally is part of a broader movement. The convergence of macroeconomic factors—including declining dollar strength, inflation, loose monetary policy, and political instability—is encouraging greater adoption and fortifying Bitcoin's role in the evolving financial landscape.

As of October 5, 2025, 20:09 UTC, Bitcoin (BTC) is trading at $122,639.47, with a 0.54% increase in 24-hour trading volume, according to CoinMarketCap.