Bitcoin gave back a chunk of its weekly gains after newly appointed Federal Reserve Chair Kevin Warsh used his Jackson Hole keynote to remind markets that inflation is still very much the Fed’s problem to solve. BTC slid below $80,000 intraday before stabilizing in the $79,000 to $79,500 range, a move that triggered nearly $488 million in crypto liquidations.
What Warsh actually said
Speaking at the Fed’s annual Jackson Hole symposium on August 28, Warsh zeroed in on inflation numbers that remain stubbornly above the central bank’s 2% target. The Fed’s preferred measure, the Personal Consumption Expenditures gauge, stood at 3.7% year-over-year. Over the previous six months, the annualized reading was even hotter at 4.1%.
“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”
Treasury yields climbed in the aftermath, and the probability of a September rate hike jumped from roughly 35% to somewhere between 50% and 60%. The shift in expectations happened fast enough to catch leveraged crypto traders off guard, hence the nearly half-billion dollars in liquidations.
Why Bitcoin reacted the way it did
Bitcoin’s intraday low landed somewhere in the $77,800 to $78,600 range before buyers stepped in. Bitcoin recovered to roughly $79,000 to $79,500 within hours. The $488 million in liquidations were overwhelmingly on the long side, meaning traders who had bet on continued upside got caught leaning the wrong way.
Warsh’s relationship with crypto
Warsh has publicly acknowledged Bitcoin as both a market signal and an alternative asset, a notable departure from the dismissive tone of some previous Fed leaders. While he has acknowledged Bitcoin as an “important asset” that can serve as a check on monetary policy, he has simultaneously indicated that its volatility limits its practical use as a currency.
The broader macro setup remains tricky. PCE inflation at 3.7% is almost double the Fed’s target, and the six-month annualized rate running at 4.1% suggests price pressures are actually re-accelerating rather than grinding lower.