Bitcoin Faces Dual Pressure as Rate Hikes and Crypto Legislation Loom

Bitcoin's late-summer rally is facing a major test as it prepares to weather dual pressure from Federal Reserve rate hikes and Congressional voting on crypto legislation. The world's largest cryptocurrency rebounded in late August, breaking through $70,000 after hovering near a two-year low of around $60,000 for several months.

Data from the options platform Derive.xyz shows that the Bitcoin options market has turned bullish for the first time in 12 months, with many traders betting that Bitcoin could reach $80,000 or higher by December. Analysts say this optimism is out of step with headwinds such as tensions in the Middle East, a dimming chance of passing a key crypto bill to boost adoption, and mounting market expectations for Fed rate hikes.

Despite these challenges, some investors believe that Bitcoin has reached its bottom and expect it to sustain its momentum. 'Bitcoin had already been in oversold territory for some time,' said Matthew Dibb, Chief Operating Officer of Stack Funds. 'Short-term traders are viewing inflation data and interest rate hikes as short-term threats.'

Options traders' skew turns bullish, with Sean Dawson attributing the improvement in sentiment to a broad return of capital to the crypto market after the SpaceX IPO siphoned off liquidity.