Bitcoin surges to a record high of $122,700; what's driving the crypto rally?

Bitcoin holders are rejoicing as it hit new record levels of $122,700. The cryptocurrency has seen a massive rally of 64% from its recent lows touched in April 2025. The Bitcoin prices are also up over 31% in 2025 on a YTD basis.

Cryptocurrency has emerged as one of the leading asset classes in 2025, outperforming equity, bonds and commodities. The Dow Jones, S&P 500 and NASDAQ—the benchmark US indices—have recorded modest gains of 4% to 7% so far in 2025. Meanwhile, gold has gained 27% and silver has jumped 34%, outperforming Bitcoin so far this year.

Potential hedge against the US dollar

The US economy remains at a critical juncture, with deficits rising at a faster pace and leading to ballooning debt. The recently passed “One Big Beautiful Bill” could add over $316 billion to the US deficit this year, pushing the total US debt past $35 trillion by the end of 2025. The mounting debt crisis has led to a sharp surge in demand for cryptocurrencies as a hedge against the falling US dollar. The dollar index is down over 10% in 2025 against Bitcoin, which is up over 30% in the same period, underscoring the significance of crypto hedge against the dollar.

Easing regulations

Since the start of Trump’s presidency, crypto holders have seen a golden period with major announcements being made to support the crypto ecosystem. Even during the previous administration, crypto holders witnessed significant developments in 2024. In January 2024, the SEC approved the Bitcoin ETF, the world’s first cryptocurrency exchange-traded fund. This led to a pivotal development in the history of the crypto world as it opened doors for a new set of investors who could participate in crypto without holding it as an asset.

Further, the Trump administration passed two bills in 2025, which further boosted the sentiments of crypto investors. The GENIUS (Guiding and Establishing National Innovation for US Stablecoins) Act 2025, which was recently passed in the Senate on June 17 with a bipartisan vote of 68-30, is awaiting House approval. The act establishes the first federal framework for US dollar-pegged stablecoins. The act focused on stablecoins, officially legitimising the crypto ecosystem by protecting it with a regulatory framework.

Rising institutional buying

Since the launch of Bitcoin ETFs and regulatory oversight by the SEC, the cryptocurrency has seen rising interest from institutional investors who can now diversify into crypto assets. The largest Bitcoin ETF by BlackRock holds $76 billion in assets under management, a sharp $50 billion increase since July 2024. In contrast to this, gold ETFs took 15 years to reach this milestone, which the Bitcoin ETF achieved in less than a year. The sharp jump in institutional flows into crypto assets like Bitcoin, which has a limited supply, is also one of the factors for the recent rally.

Risk-on sentiment among US investors

Apart from the above, the larger trigger lies with the overall sentiment in the US financial markets. The US markets are trading at record-high levels amid a frenzy in tech stocks. Nvidia became the first company to cross $4 trillion in market capitalisation on strong optimism around AI. This signifies that US investors are incrementally adding riskier assets like equities and not leaving crypto behind. A potential Fed rate cut could lead to a larger rally in riskier assets like cryptos.