Has the Bitcoin Rally Fizzled Out?

(13:50 GMT) *After August Rally, Bitcoin Faces Resistance - Analysts (13:50 GMT) *Bitcoin, Crypto Seen Rallying on Better-than-Expected Clarity Act Vote (13:50 GMT) *Bitcoin Gains Dependent on Weakening Dollar, Institutional Uptake, Analysts Say (13:56 GMT) Has the Bitcoin Rally Fizzled Out?By Joe Stonor and Farhan RafidFor a while this summer, bitcoin and other cryptocurrencies were in the doldrums, eclipsed by the shinier lights of surging artificial-intelligence stocks and prediction markets. Then in August, bitcoin posted its biggest rally since 2023.Behind the resurgence: a short-covering frenzy prompted by U.S. Treasury Secretary Scott Bessent's Aug. 19 announcement that the government would at least double its buyback of long-dated debt led to negative bets on the dollar; President Trump's push for Congress to pass a "fair version" of the digital regulatory act on the same summer day; and a broader return to risk-on sentiment with crypto exchange-traded funds posting strong in-flows in August.Bitcoin rose around 25% to $80,000 from Aug. 19 to Aug. 25, climbing above $82,000 at the start of September. It has since pulled back--last trading at around $77,850 on Monday.Struggling to breach the $80,000 level again, investors are questioning whether the bitcoin rally has fizzled out--for now.Assets like cryptocurrencies are hard to value, and often meet seemingly arbitrary barriers to progress, said Stephen Coltman, head of macro at 21Shares, a provider of crypto-based exchange-traded products. At the moment, investors are seeing the $80,000 level as an opportunity to sell, Coltman said.Bitcoin remains a long way shy of its peak of around $125,000 in October 2025, and some analysts are skeptical such levels will be repeated any time soon. On the other hand, the Treasury's willingness to countenance a weakened dollar and changing regulatory winds could spur bitcoin and its peers higher, analysts said.Trump's Aug. 19 Oval Office summit of crypto leaders, alongside his urging of Congress to pass the Clarity Act, widely considered crypto-friendly, helped give bitcoin and other digital coins a leg up during the August rally.But after a brief spike, market watchers are cautious of legislative wins for the industry. The Senate is set to hold a key procedural vote Tuesday on the Clarity Act, which would represent the first regulatory framework expected to usher in wider acceptance of crypto. The legislation faces several challenges, including disagreements over ethics language that would prevent government officials from profiting off digital assets.Analysts also debate the extent to which bitcoin can be viewed as a safer alternative to a weakening dollar--the so-called debasement trade.Coltman, 21Shares' macro chief, is a proponent of the theory, arguing that the Treasury's apparent willingness to tolerate a weaker dollar means "you don't want to be holding dollars…you want to be holding things that can't be printed, like gold, like bitcoin."Others aren't convinced."I don't buy that," said Aaron Chan, a crypto strategist at Dutch market maker Flow Traders. "Bitcoin trades much more like a risk asset than it does any sort of dollar hedge."To break out of its current range, bitcoin needs a new catalyst, analysts say.Friendly crypto regulation is one possibility, with Coltman flagging the potential for a better-than-expected outcome in the Senate's vote. A surprise Federal Reserve rate hold later this week would also provide a boost. And even if the Fed hikes, Treasury intervention could cancel out the restrictive impact of higher rates, Coltman said. A further uptick in investor interest would also spur coins higher.Any long-time crypto investor will know that digital assets can surprise to the downside, as easily as they can to the upside."There are still significant risks," said Fabian Dori, chief investment officer at Swiss crypto group Sygnum Bank. Runaway inflation, higher-for-longer interest rates and further escalation between the U.S. and Iran could knock the risk appetite that crypto has historically relied on.But crypto bulls point to institutional adoption of the asset class as a bulwark against sharp falls.There are signs of increasing demand already. On Bitget, a crypto exchange, trading volumes are now about equally split between retail and institutional money, compared to a retail majority of around 80% in 2024, according to the exchange's Chief Executive Gracy Chen."There's definitely real institutional demand," Chen said.George Khoury, global head of research and education at CFI Financial Group, said clearer U.S. crypto rules could bring more banks, institutions and governments into bitcoin, gradually shifting it from an extreme-risk speculation toward a medium-to-high-risk portfolio allocation."The closer we come to a controlled asset, the higher the demand will be in the longer term," he said.Write to Joe Stonor at [email protected] and Farhan Rafid at [email protected]