Fed Rate Decision Set to Test Bitcoin's Momentum
Bitcoin's recent rally has caught many investors off guard, but its momentum is facing a crucial test this week. The Federal Reserve's rate decision on Wednesday will put pressure on the cryptocurrency, which has surged past $70,000 in late August after months of trading at two-year lows.
The rebound was fueled by improving sentiment and a brief retreat in Treasury yields, but analysts warn that a rate hike could suck liquidity out of risk assets like Bitcoin. However, some investors believe that Bitcoin's structural demand picture is improving, particularly if the Treasury's increased buybacks are seen as a bid to tamp down yields.
While many traders have assigned a high likelihood of a rate hike, with an 85% chance according to Derive.xyz, options market data suggests a bullish outlook for Bitcoin. The 25-delta skew turned positive on August 20, indicating a premium to buying upside calls.