Bitcoins recent rally briefly surpassed its $120,500 breakout target, which has raised the question of whats next for the leading cryptocurrency.

But liquidity trends will determine whether momentum continues or stalls near all-time highs.

Liquidity for Breakout Potential

In its latest market commentary, Swissblock said that while broader macroeconomic volatility and potential downside pressure remain in play, Bitcoins price momentum is aligning and showing signs of ignition. Such a setup typically supports further gains.

However, the firm warned that the path ahead will depend on the correlation between key on-chain and liquidity metrics. Meanwhile, Swissblocks analytics firm Bitcoin Vector found that as Bitcoin edges closer to its all-time high, network growth is currently high at a ratio of around 82, and liquidity is in a mid-range at approximately 52.

This combination historically favors continuation if liquidity strengthens into the 50-60 range, which is expected to provide fuel for another leg upward.

On the other hand, if liquidity falls below 40 while network growth remains high, it could signal a late-stage risk setup. This pattern often precedes choppy tops or sharp pullbacks. Bitcoin Vector said that surpassing the all-time high is only the first step; sustaining the breakout and entering full price discovery will depend on liquidity trends.

BTC Moves in Step with Stocks

While Bitcoin managed to erase the prior weeks losses, Ethereum appears to have led the rally. The altcoin gained 21% over the past week and breached $4,300 for the first time since 2021.

QCP Capital observed that the correlation between Bitcoin and equities has strengthened significantly since mid-July.

Todays crypto performance reflected gains in US stocks, which have rebounded from last weeks post-payrolls dip to trade near record levels, and in the process, shrugged off fresh tariffs and macroeconomic uncertainty.

The immediate market focus is on Tuesdays US Consumer Price Index (CPI) release, with consensus expecting a 10 bps uptick in annual inflation to 2.8%. A softer-than-expected print would likely cement market expectations for a September Federal Reserve rate cut, odds already near certainty after a dovish pivot from several Fed officials.

QCP stated such an outcome could provide the push needed for crypto to set new all-time highs. But, a hotter CPI reading could prompt a pause in the rally, with some traders already hedging via increased demand for front-end $115k-$118k BTC puts, while topside short-call covering continues.

The firm expects front-end volatility to remain high until the CPI release, potentially followed by compression unless BTC decisively breaks resistance. Beyond on-chain liquidity metrics, institutional demand and spot ETF inflows remain critical watchpoints as Bitcoin hovers near its peak, while traders may engage in profit-taking likely before CPI.

QCP maintained a structurally bullish outlook and cited the markets resilience in absorbing recent large OG whale sell-offs without losing upward momentum. Key upcoming data include US CPI on August 12th, PPI and unemployment claims on August 14th, and US retail sales on August 15th.