Bitcoin traded below $86,000 as a strong dollar weighed on demand for cryptocurrencies.

The flagship cryptocurrency traded flat at $85,799 on Tuesday after the dollar reached its highest level since April 2025 against a basket of currencies Monday, supported by French debt concerns. As the global reserve currency, a rise in demand for the dollar's safe haven characteristics typically suppresses sentiment for risk assets such as cryptocurrencies.

Crypto markets await the next catalyst after expectations for the Federal Reserve to raise rates later this month have trimmed back in recent sessions. "A quieter macro week might be just what cryptocurrencies need to make some more headway," said IG strategist Chris Beauchamp in a note. The focus now turns to the coming U.S. earnings season, he added.

Since consolidating above the $80,000 threshold on Sept. 18, bitcoin has struggled to mount a further push beyond $87,000. Spot demand has to hold after the short squeeze is over for any sustained rally to occur, said Maksym Sakharov, CEO of blockchain banking provider WeFi.

"The test is whether ETF inflows remain strong and Bitcoin can keep the $85,000 area as a floor if macro conditions turn less friendly," he said. "If buyers keep showing up on red days, I'll believe the market has changed."

Investors are looking ahead to the Federal Reserve's next meeting, which will take place Oct. 27 and 28. Holding rates could potentially ease the pressure seen on equity and commodity markets across the board. Last month's meeting resulted in the Fed raising its benchmark interest rates for the first time in three years.