U.S. Federal Reserve monetary policy has again come into focus as bitcoin struggles to break above $80,000.

CoinShares assessed that the Fed's interest-rate path is acting as a key factor capping bitcoin's upside, even as demand for crypto investment continues, Cointelegraph reported on Sept. 7 (local time).

CoinShares head of research James Butterfill said in a recent market update that bitcoin is trading like gold again, but the ceiling around $80,000 is still set by the Fed. That means liquidity and rate expectations, rather than bitcoin's price itself, are driving fund flows.

Market reaction was clear after the Jackson Hole meeting. Fed Chairman Kevin Warsh said progress on inflation was limited and price pressures were not easing fast enough. After comments that it was still too early for Fed policymakers to be confident inflation was returning to the 2 percent target, about $100 million immediately flowed out of digital asset investment products. The market then sharply raised the perceived odds of a September rate increase.

Fund flows then reversed. Inflows continued over the following week, recovering to $1 billion as of Sept. 4. During that period, Fed Governor Christopher Waller cited recent signs of easing inflation and said the Fed could lean toward holding rates in September if upcoming inflation data show further progress. As fears of a rate hike eased, appetite for risk assets also returned.

Butterfill said investors are not exiting the asset class but trading the rate path. He said the direction of flows into crypto funds moved more sensitively to shifts in monetary policy expectations than to a collapse in confidence across the asset class.

As of Sept. 8, fed funds futures markets are pricing in about a 60 percent chance of a rate increase after next week's Federal Open Market Committee meeting, based on CME Group data. The market has priced in the possibility of a 25 basis-point hike on Sept. 16. It shows bitcoin and major digital assets remain highly sensitive to liquidity conditions and shifts in monetary policy.

That trend also ties in with last month's bitcoin rebound. The U.S. Treasury said at the time it would double the size of its long-dated Treasury buybacks per operation to $4 billion from $2 billion. Bitcoin rose that month from the low $60,000 range to above $80,000. The expanded buyback programme is set to run from Sept. 9 to Nov. 4.

Some in the market said the rise should not be seen as driven only by crypto-specific factors. 21Shares co-founder Ophelia Snyder said equity selling and changes in the yield curve appeared around the Treasury announcement, and that uncertainty related to the Iran war added to swings in oil prices and stock prices in line with diplomatic expectations. She added that the current bitcoin rally may be more related to moves to reduce exposure to the United States than to crypto's own catalysts.

Against that backdrop, the market's focus is turning back to liquidity. Standard Chartered forecast that bitcoin could reach $100,000 before year-end. In the near term, the outcome of the September FOMC meeting and inflation data remain key variables in whether bitcoin can settle above $80,000.