Bitcoin price fell 3% to $77,000 after Federal Reserve Chair Kevin Warsh delivered a hawkish speech at the Jackson Hole event, signalling that the central bank may not be finished fighting inflation despite recent macroeconomic data.
We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.
Discussing the latest summer inflation data, Warsh added:
While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved.
Why did Bitcoin fall below $80,000?
U.S. equities and cryptocurrency markets interpreted Warsh’s comments as hawkish. The tech-heavy Nasdaq fell 0.52%, while the S&P 500 declined 0.25%. Crypto markets followed, with Bitcoin leading the downturn with a 3% drop.
Source: $BTC/USDT, TradingView
Bitcoin had rallied 30% in the second half of August, supported by the Treasury’s planned $1 trillion intervention to curb rising bond yields. The upswing also helped BTC reclaim its crucial 200-day moving average.
However, the rally has stalled below $80,000, delaying Bitcoin’s attempt to reclaim the 50-week moving average at $81,800 and officially mark the end of the BTC bear-market cycle.
Can Bitcoin rally despite September Fed rate hike fears?
Inflation directly influences Federal Reserve interest-rate policy and risk sentiment across financial markets. Following Warsh’s speech, interest-rate traders raised the probability of a September Fed rate hike to 57%, a 20% increase from the previous week. The repricing reinforced renewed fears of another rate hike.
Source: CME FedWatch
Bitcoin options traders, including sophisticated professionals and institutional investors, also moved to increase downside protection.
This was reflected in the BTC 25 Delta Skew, which rose from -10% to nearly 5%, representing a 15% increase and signalling renewed demand for downside hedging.
During Bitcoin’s explosive rally last week, the metric fell below 0% for the first time this year. That indicated traders were reducing their downside hedges as many analysts expected the rally, supported by the so-called debasement trade, to continue amid concerns over U.S. fiscal debt and turmoil in the bond market.
Source: Velo
The metric’s weekend spike now suggests that Warsh has forced Bitcoin bulls to reassess their strategy.
Analyst Luke Gromen, however, believes the bond-market crisis will overshadow Federal Reserve rate decisions in the short term.
It remains a variant perception that both Fed hikes or cuts will cause the long end to rise…even as long bond yields are now up on Warsh’s ‘hawkish’ speech today.
If fears of a Fed rate hike intensify and weigh on market sentiment, Bitcoin’s price could retrace toward its 200-day moving average at $69,300.
However, if the debasement-trade narrative continues, the $80,000 level could become support for the next leg of the uptrend.
Bitcoin price outlook
Bitcoin fell 3% to $77,000 after Kevin Warsh’s hawkish Jackson Hole speech. The Nasdaq declined 0.52%, while the S&P 500 fell 0.25%. Meanwhile, the probability of a September Fed rate hike increased to 57%.
