Key facts
- Bitcoin has rebounded past $70,000 after months at two-year lows around $60,000.
- The bitcoin options market has turned bullish for the first time in 12 months, with traders betting on prices of $80,000 or higher by December.
- Open interest for the December 25 expiry is clustered at the $80,000 strike with about $710 million in notional value.
- Bitcoin exchange-traded funds saw inflows of nearly $2 billion the week of August 17.
- Traders assign an 85% likelihood of a Federal Reserve rate hike on Wednesday.
- The U.S. Senate is set to take a procedural vote on a key crypto bill on Tuesday.
Bitcoin bulls have returned after months of subdued performance, with the cryptocurrency staging a rebound past $70,000. This optimism is being tested by the Federal Reserve's upcoming rate decision and the potential passage of key crypto legislation in the U.S. Senate.
After languishing for months at around $60,000, bitcoin surged in late August as Treasury yields briefly retreated and broader market sentiment improved. This rally marks a significant turnaround from its slump of roughly 50% from its October 2025 peak of above $126,000.
The bitcoin options market has flipped bullish for the first time in 12 months, according to Derive.xyz, with many traders betting on bitcoin reaching $80,000 or higher by December. The 25-delta skew, which measures demand for bullish call options against protective put options, turned positive on August 20, indicating a premium for buying upside calls. This improved sentiment is partly attributed to a rotation back into crypto after the SpaceX IPO, which had previously drawn capital away from the market.
Open interest for the December 25 expiry is notably clustered around the $80,000 strike, with approximately $710 million in notional value, and at $100,000, with roughly $530 million. Bitcoin exchange-traded funds have also shown renewed demand, with inflows reaching nearly $2 billion in the week of August 17, following eight consecutive weeks of outflows in May and June.
Despite these bullish signals, headwinds persist. High tensions in the Middle East, elevated inflation, and the possibility of a Federal Reserve rate hike, which typically reduces liquidity in risk assets, pose challenges. Traders are assigning an 85% likelihood of a rate hike on Wednesday, following recent hot inflation data. Long-end bond yields nearing 5% also present increased competition for capital.
Some analysts believe bitcoin has hit its lowest point, citing its historically volatile nature. The potential for a one-off rate hike, rather than the start of a hiking cycle, could be a positive surprise, according to Fed Chair Kevin Warsh. However, others suggest any rate hike would likely dampen the recent rally.
Furthermore, some bitcoin proponents argue that increased Treasury buybacks, aimed at curbing yields, could raise concerns about dollar debasement, thereby boosting demand for scarce assets like bitcoin. Brian Vieten, senior analyst at Siebert Financial, noted that bitcoin's structural demand picture is improving, even as the near-term setup is vulnerable to macro and positioning volatility.
The crypto policy landscape in the U.S. under President Donald Trump's administration also presents potential catalysts. While the U.S. Clarity Act, a key crypto bill aimed at defining tokens as securities or commodities, is likely to face opposition and may not pass, a procedural vote in the Senate on Tuesday could determine its fate. If the bill were to pass unexpectedly, it could serve as a fundamental catalyst for upside, according to Jim Ferraioli, head of crypto research at Charles Schwab.