(Bloomberg) -- Bitcoin slipped back below $80,000 on Friday after Federal Reserve Chair Kevin Warsh pledged to bring inflation back to target, pushing short-term Treasury yields higher and cooling some of the week's risk-on momentum.

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The move was modest rather than a reversal of the broader crypto rebound. Warsh said financial conditions are not restrictive and stressed that inflation must move clearly toward the Fed's target, reinforcing expectations that policy could stay tighter for longer. Bitcoin eased with other rate-sensitive assets but remained well above levels seen earlier this month.

The crypto market is still in a limbo with no clear directional views in sight after a short squeeze due to a record liquidation in leveraged bearish bets on digital assets last week. The open interest for Bitcoin futures, which makes up the majority of crypto trading, has not seen a significant recovery after the wipeout, according to data from Coinglass.

"Despite a slight hawkish tilt from Warsh, the market is digesting all of this relatively well so far," said Jasper De Maere, OTC trader at Wintermute. "For me, the speech fell in line with expectations."

Bitcoin dropped as much as 2.9% to $77,813. That's down from an all-time high of around $126,000 last October.

Traders are looking at longer-term metrics to gauge the health of the rebound. According to a research report by Galaxy Digital, in four of the five completed crypto bear markets, once the 50-week moving average was first broken to the upside, the bear market bottom was definitively in.

"From here it comes down to the 50-week moving average: it needs to hold on a weekly close for the bullish structure to stay intact, and alts are the higher-beta expression of that same test," said Mostafa Al-Mashita, co-founder of Secure Digital Markets. "The rally looks structurally healthier than a typical leverage-driven crypto move."

Crypto options traders are cautiously optimistic in the medium to long term. On the heels of Bitcoin surging from $62,000 to $80,000 in little more than a week, $6.4 billion in Bitcoin options expiry on crypto exchange Deribit leaves market makers facing key positioning decisions that could amplify volatility.

"Leading into today, we've seen skew start to shift more call-heavy and implied volatility rise above the historic lows its waded in the past couple months. The expiration offers an opportunity for the market to reset positioning," said Alex Blume, founder and CEO of Two Prime. "I am looking to see if the skew continues to trend towards calls and if implied volatility remains elevated."

There have been very big blocks of $85,000 call options with a September expiry, and $90,000 call option with expiry dates in November and December, according to De Maere.

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