Bitcoin’s recent recovery is facing a critical test this week as investors weigh a potential Federal Reserve rate hike against a key U.S. Senate vote on cryptocurrency legislation that could provide fresh support for the market.
The world’s largest cryptocurrency spent months near two-year lows of around $60,000 before rebounding in late August and briefly moving above $70,000. The recovery came as U.S. Treasury yields eased from recent highs and broader investor sentiment improved.
The move represented a significant turnaround for bitcoin, which had fallen by roughly half from its October 2025 record above $126,000.
Despite the challenges facing the cryptocurrency market, some investors believe bitcoin may have already passed its weakest point. However, renewed pressure from higher interest rates and bond yields could make it harder for the rally to continue.
Traders are currently pricing in an 85% probability of a Federal Reserve rate hike on Wednesday following stronger-than-expected inflation data. At the same time, longer-term U.S. Treasury yields are approaching 5%, increasing the competition for investor capital and potentially reducing the appeal of riskier assets such as bitcoin.
“BTC was in oversold territory for some time,” said Matthew Dibb, chief operating officer of Singapore-based crypto investment manager Stack Funds. He added that short-term traders are focused on inflation data and interest-rate increases as immediate risks to bitcoin.
Options Traders Turn More Bullish
Options markets are showing signs of improving confidence among bitcoin investors.
The 25-delta skew, a measure that compares demand for bullish call options with demand for protective put options, turned positive on August 20, according to Sean Dawson, head of research at Derive.xyz.
A positive reading indicates that investors are willing to pay a premium for options that could benefit from further gains in bitcoin.
The shift suggests that some traders are positioning for additional upside, even as monetary policy and inflation remain major risks for the cryptocurrency market.
With the Federal Reserve decision and U.S. crypto legislation both in focus, bitcoin’s latest rebound could face an important test in the days ahead.
