Encouraging comments from senior officials regarding cryptocurrency regulation in the US also bolstered market sentiment.

Bitcoin rose 4.2% to $80,943.6 as of 9:22 AM ET. The world's largest cryptocurrency briefly reached a nearly four-month high above $82,000 during the previous session.

The absence of new military clashes between the US and Iran also brought some relief to markets.

Cryptocurrency stocks posted significant overnight gains, with Strategy, the largest corporate holder of Bitcoin, rising nearly 18% during Thursday's session. Bitcoin Heads for Weekly Gains on Rate and Regulatory Optimism

Bitcoin is poised to add 3.5% this week, marking its third consecutive week of gains.

The rally on Thursday and Friday was driven primarily by a sharp decline in U.S. Treasury yields after comments from Federal Reserve Governor Christopher Waller helped allay some fears of an imminent interest rate hike.

Waller told Reuters he is leaning toward keeping interest rates unchanged at the Fed's upcoming meeting this month, especially if inflation data indicates a moderation in price pressures.

His comments triggered a sharp reduction in bets on a September rate hike: according to CME Fedwatch, the probability of such an outcome is 50.4%, down from over 60% at the start of the week.

The prospect of rates remaining unchanged is favorable for Bitcoin, as its speculative nature makes it highly sensitive to changes in yields. The August cryptocurrency rally was interrupted by a brief spike in returns.

Bitcoin also received a boost from comments from Securities and Exchange Commission (SEC) Chairman Paul Atkins, who said he expected a Senate vote on the much-debated Clarity Act on September 15.

He called on lawmakers to pass the bill and send it to President Donald Trump for signature by the end of the month.

Atkins also announced that the SEC is preparing its own crypto regulation, which could operate in parallel with the Clarity Act, a bill that has been stalled in Congress.

Crypto markets are closely monitoring the Clarity Act as the next important step toward regulatory legitimacy. However, passage of the law has been delayed due to ongoing disagreements over the treatment of stablecoin returns and language restricting lawmakers' trading in cryptocurrencies. Crypto Market Today: Altcoins Rise, Set for Weekly Gains

The broader crypto market rose on Friday and is also heading for a third consecutive week of gains.

Ethereum, the world's second-largest cryptocurrency, rose 4% to $2,509.53, up 2.1% for the week.

XRP rose 6.1% and is up 3.7% for the week, while BNB rose 3.8% and is up more than 4% for the week.

Solana rose 2.9%, while Cardano outperformed, adding 8%.

Memcoins Dogecoin and $TRUMP rose 4.8% and 6.4%, respectively.