Bitcoin briefly climbed back above $38,000 on Tuesday amid optimism the US central bank may be closer to lowering borrowing costs if inflation continues to decline.

The largest cryptocurrency by market value gained as much as 3.3% to $38,264 before trimming the increase. Bitcoin reached an 18-month high of $38,422 on Friday. Lower rates generally increase investors’ appetite for riskier assets such as digital tokens.

“As rates reverse, investors will return to risk assets in search of better returns,” said Michael Safai, partner at quantitative trading firm Dexterity Capital. “This, coupled with the momentum that crypto has built in recent months with ETFs and putting FTX in the rear-view mirror, has traders feeling like the conditions for a new bull run are coming together.”

Federal Reserve Governor Christopher Waller said he’s encouraged by a recent slowing of economic activity, which may indicate the central bank’s policy is tight enough. He made the comments as part of prepared remarks Tuesday for an event at the American Enterprise Institute in Washington.

Bitcoin has rallied more than 40% since the start of October on expectations the US Securities and Exchange Commission is poised to approve a exchange-traded fund for the first time that invests directly in the digital asset. Bitcoin is up about 130% this year, after tumbling 64% during 2022.

The optimism has also helped to boost so-called crypto stocks such as exchange operator Coinbase Global Inc., miner Marathon Digital Holdings Inc. and ETF proxy MicroStategy Inc. Shares of all three have rallied more than 250% this year.