Bitcoin recorded its strongest August rally since 2017 despite renewed military clashes between the United States and Iran and a hawkish turn by the U.S. Federal Reserve (Fed).

On Aug. 31 local time, blockchain media outlet CryptoSlate reported that bitcoin was trading around $78,000, posting an August gain of more than 24 percent.

The rally has drawn attention because it held up despite a string of macro shocks. Brent crude rose to around $91 a barrel after U.S. air strikes on targets in Iran and Iran's attack on U.S. military facilities in Jordan. The surge in oil prices has reignited inflation fears and is fueling expectations that the Fed could keep tightening for longer.

Bitcoin absorbed Middle East geopolitical risks after last week's Fed-driven shock. Fed Chair Kevin Warsh drew a line at market expectations for rate cuts in a speech at the Jackson Hole symposium. He said inflation is still above the Fed's 2 percent target and that the top priority for policymakers is price stability.

Warsh then warned against excessive forward guidance, saying policymakers and financial markets could become trapped in a "hall of mirrors." After the remarks, the probability of a 25 basis point rate increase at the September meeting rose to 60 percent. Bitcoin at one point slipped below $77,000 before recovering the $78,000 level over the weekend.

Middle East risks added another burden for the Fed. U.S. Central Command said it carried out limited and precise military action against Islamic Revolutionary Guard Corps (IRGC) mine-laying forces on Larak Island.

Still, the oil market also produced an assessment that an immediate supply shock is unlikely to materialise. Ole Hansen (올레 한센), head of commodity strategy at Saxo Bank, said, "This incident has lowered the chances of ending the war again." He also said daily shipments of 6,000,000 to 8,000,000 barrels of crude through the Strait of Hormuz are still continuing without disruption, meaning further sharp gains in international oil prices could be limited. That implies bitcoin could be more likely to continue range-bound consolidation than to suffer a sharp drop as long as energy-driven shocks remain contained.

Some signs of improvement are also emerging in the market's internal structure. Jurrien Timmer (주리엔 티머), global macro director at Fidelity Investments, assessed that the recent correction may have entered a mature stage. He said bitcoin held the lower end of its power curve on its own strength and has digested a significant share of the time correction needed in a mild four-year cycle winter phase. The recent low of $59,572 was above that model's support line of $58,237.

Still, it is too early to conclude that the rebound has led into a full-fledged expansion phase. Market analysis firm Bit Official said growth in stablecoin market capitalisation has stalled. Circle's USDC supply edged up, but Tether's USDT did not show a clear expansion trend. It warned that without a strong inflow of new liquidity from fiat currencies into stablecoins, the current rise could rely more on derivatives positions than on spot buying.

Spot trading remains weak. CryptoQuant data showed exchange spot volumes stayed around September 2023 levels even during August, when bitcoin surged. Compared with the previous peak before October 2025, Binance's monthly spot volume fell to about $44 billion from $198 billion, Gate dropped to $14 billion from $53.4 billion, and Bybit declined to $17.4 billion from $41.2 billion. The average drop across the three exchanges was about 70 percent.

Even so, the contraction in trading is not deepening. Binance's August volume rose by about $1.6 billion from July, and overall activity across major exchanges was broadly stable from the previous month. CryptoQuant said investor departures during the summer may have been close to an extreme, adding that a recovery in volume alongside rising prices could be a stronger signal that bitcoin is re-entering an expansion phase.

In the near term, the market is watching the $80,000 to $82,000 range. Bit Official said bitcoin is working through resistance between $78,214 and $82,139, adding that a firm break above and hold of $82,000 could further strengthen a bullish scenario. It also cited $70,973 as a key support level for gauging whether the broader trend can be maintained.

Without a major reversal, bitcoin is likely to end the month with its strongest August performance since 2017. Still, a remaining task is that the next leg higher would require more than a price rebound and must be accompanied by an increase in exchange spot trading.