Analysis-Bitcoin's late summer rally set to face off against the Fed, Congress

By Hannah Lang, Gertrude Chavez-Dreyfuss and Medha Singh

Sept 14 (Reuters) - Bitcoin bulls are back after months of gloom, but a Federal Reserve rate decision this week will test that optimism, even as a key Senate vote on crypto legislation could provide a surprise tailwind.

After languishing for months at two-year lows of around $60,000, the ‌world's largest cryptocurrency in late August staged a rebound past $70,000 as surging Treasury yields briefly retreated and broader sentiment improved. The rally marked a sharp turnaround for bitcoin, which ‌had slumped roughly 50% from its October 2025 peak of above $126,000.

Although traders are assigning almost no chance of bitcoin rescaling that peak, the bitcoin options market has flipped bullish for the first time in 12 months, according to data ​from options platform Derive.xyz, with many traders betting bitcoin could hit $80,000 or higher by December.

At first glance, that optimism seems misguided: tensions in the Middle East remain high, the odds of the U.S. Senate passing a key crypto bill that could boost adoption have dimmed, and inflation has remained elevated, raising expectations of a Fed rate hike which usually sucks liquidity out of such risk assets.

Despite those headwinds, many investors believe bitcoin, a notoriously volatile asset, has hit its lowest ebb. With traders assigning an 85% likelihood of a rate hike on Wednesday following hot inflation data, and with long-end bond yields nearing ‌5%, creating more competition for capital, the question now is whether ⁠bitcoin can sustain momentum, said analysts.

"BTC was in oversold territory for some time," said Matthew Dibb, chief operating officer of Singapore-based crypto investment manager Stack Funds. "Short-term traders are looking towards inflation figures and rate rises as short term threats."

The 25-delta skew, which compares demand for bullish call ⁠options against protective put options, turned positive on August 20, said Sean Dawson, head of research at Derive.xyz. That implies there is a premium to buying upside calls, he said.

"That is a bit bullish," he added. Dawson attributed the improved mood to a general rotation back into crypto after the blockbuster SpaceX IPO sucked capital out of the market, while Korean equities, also attractive to speculative investors, have cooled.

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, ​according to Derive.xyz.