Bitcoin Bulls Face Off Against Fed Rate Decision and Crypto Legislation Vote

Bitcoin's late summer rally has sparked optimism among bulls, but faces stiff competition from the Federal Reserve rate decision this week and an uncertain outcome for key crypto legislation in Congress.

The world's largest cryptocurrency surged past $70,000 in late August after months of languishing at two-year lows around $60,000. Traders have assigned a high likelihood of a rate hike on Wednesday following hot inflation data, but some believe bitcoin has hit its lowest ebb and could see renewed demand.

The 25-delta skew, which compares demand for bullish call options against protective put options, turned positive on August 20, implying a premium to buying upside calls. Open interest for the December 25 expiry is clustered at the $80,000 strike with about $710 million in notional value and at $100,000 with roughly $530 million.

While rising Treasury yields typically hurt risk assets, some bitcoin bulls argue that increased buybacks by the Treasury could stoke concerns about dollar debasement, boosting demand for scarce assets like bitcoin. The U.S. Senate is set to take a procedural vote on the crypto bill this week, which could determine its fate and potentially boost adoption.