By Isabel Wang

The lack of clarity around crypto's regulatory framework hasn't stopped bitcoin from surging, as investors haven't abandoned hopes for clearer U.S. rules

Bitcoin is back to its late-January highs, while the tech-heavy Nasdaq Composite on Monday logged its first record close since June.

After weeks of looking all but lost amid a stunning decline this year, bitcoin broke above $86,000 on Monday to touch its highest level since late January.

That's likely a relief for crypto bulls, but the comeback might say less about bitcoin's revival than a marketwide return of risk appetite - from chip and software names to meme stocks.

The world's No.1 cryptocurrency (BTCUSD) has now returned to its highest level in eight months. Up over 7% as of 5 p.m. Eastern time Monday, bitcoin was hovering at its highest level since Jan. 28, when it traded at $89,004.47, according to Dow Jones Market Data.

Bitcoin's upside was riding alongside a broader momentum trade on Wall Street, with technology and artificial-intelligence names on the U.S. stock market surging in tandem. The Roundhill Magnificent Seven ETF MAGS - which tracks shares of Alphabet (GOOGL) (GOOG), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA) - was up 3.5% Monday, logging its first record close in five months. The PHLX Semiconductor Index SOX jumped 4.3%, while the iShares Expanded Tech-Software Sector ETF IGV rose 2.4% Monday, according to FactSet data.

Monday's market action is "a collective statement of the resilience that we saw following last week," said Mark Hackett, chief market strategist at Nationwide Investment Group.

The fact that stocks largely shrugged off last week's interest-rate hike from the Federal Reserve, ongoing uncertainty in the oil market (CL00) (BRN00) and the 10-year Treasury yield BX:TMUBMUSD10Y breaking above 5% is, in itself, an "all-clear signal" for markets, Hackett told MarketWatch in a phone interview Monday.

"Calm is the highlight, but resilience is even more important because there are so many potential catalysts to drive markets lower," he noted.

To be sure, calm markets do have a tendency to turn volatile quickly. Broader financial markets still face a growing list of threats, including from the Iran war and its uncertain path after more than six months. But, for now, investors in the stock market have decided to put worry aside.

That's part of the reason why the risk-on sentiment is beginning to spread to cryptocurrencies - an asset class known for its volatility - which has helped bitcoin's comeback from the graveyard, Hackett said.

Interestingly, the crypto rally runs counter to expectations that the collapse of the Digital Asset Market Clarity Act could weigh on bitcoin. Instead, the market largely looked through it. The Clarity Act failed its procedural Senate vote last week, falling short of the required 60 votes.

The reaction in the crypto market suggests that investors have not abandoned "the prospect of clearer U.S. rules," said Alice Liu, head of research at CoinMarketCap, as markets appear to be shifting their expectations away from legislation and toward the federal agencies responsible for interpreting and enforcing existing regulation.

From Barron's: Clarity Act Collapses-But Not All Is Lost for Crypto

Bitcoin was eerily quiet earlier this month, but recent fresh interest from both individual and institutional investors have driven its surge in price. Open interest for bitcoin - the total number of outstanding derivative contracts, such as options and futures - is currently higher than it has been on about 92% of the days over the past three months, while forced liquidations were higher than they had been on only about 43% of days during the same period, according to data compiled by CoinMarketCap.

In other words, there are a lot more bitcoin options and futures contracts held by investors in active positions than usual right now.

Big institutional buying has also helped fuel the rally. On Monday, Michael Saylor's Strategy (MSTR) purchased bitcoin for the first time in three weeks, acquiring $75.7 million worth at an average price of $79,670 per coin, according to a SEC filing. Shares of Strategy popped 9.5%, according to FactSet.

"Bitcoin has reached a technical milestone the market has waited roughly 10 months to see," Liu said. Now, the question is no longer simply whether the cryptocurrency has found a bottom, but whether its recent move can develop into a lasting bull market, she told MarketWatch in emailed commentary Monday.

As bitcoin strengthens, its relationship with the traditional stock market also has been changing. Bitcoin recently started moving more in sync with the tech-heavy Nasdaq Composite COMP and less in sync with gold prices (GC00), according to CoinMarketCap.

Bitcoin and gold were touted as hedges against currency debasement as the 30-year Treasury yield BX:TMUBMUSD30Y surged to a 19-year high and the U.S. dollar DXY tumbled last month.

"Bitcoin is therefore recoupling with growth and technology equities while shedding the inflation-hedge correlation it carried through the summer," Liu noted.

But in Hackett's view, it's often difficult to pinpoint what's driving bitcoin, since market catalysts are often very unpredictable.

"Today is a pro-cyclical and risk-on, tech-driven rally in bitcoin, so it's not based on dollars, not based on inflation, not based on developments geopolitically," he said. "It's very unpredictable in terms of what the drivers are, which makes me more nervous than if this was more understandable."

U.S. stocks finished sharply higher on Monday. The S&P 500 SPX was up 1.5%, while the Dow Jones Industrial Average DJIA rose 0.7%. The Nasdaq, meanwhile, advanced 2.3% to close at a record high for the first time since June, according to FactSet.

-Isabel Wang

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09-21-26 1747ET