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

Bitcoin's recent rally from around $60,000 to $70,000 has reignited optimism among traders, despite lingering concerns about the Federal Reserve's rate decision and a pending Senate vote on crypto legislation. The options market has turned bullish for the first time in 12 months, with traders betting the price could hit $80,000 or higher by December.

However, rising Treasury yields and the possibility of a Fed rate hike, currently projected at an 85% likelihood, create significant headwinds for Bitcoin's continued upward momentum. Analysts note that Bitcoin's price is currently in oversold territory, and short-term traders are closely monitoring inflation data and rate hikes.

The "25-delta skew" has flipped bullish, indicating a premium for buying upside calls. This optimism is partly fueled by Bitcoin's structural demand, which some argue is improving despite near-term macro volatility. However, the outcome of the Senate vote on a key crypto bill and potential policy surprises, such as changes to the U.S. dollar, could provide a lift for Bitcoin's price in the near term.