Following a speech by the Chairman of the U.S. Federal Reserve (Fed) Kevin Warsh, the price of the leading cryptocurrency dropped from a local high of $81,455 to $76,877. At the time of writing, the asset is trading around $77,700.
Ethereum’s price corrected by 2.1% to $2400. Most of the largest cryptocurrencies by market capitalization are in the red.
In his speech, Warsh reaffirmed the Fed’s commitment to a 2% inflation target. He noted that weak summer data on the CPI and PCE do not yet indicate a significant improvement in the underlying trend.
The annual growth of the personal consumption expenditures index is 3.7%, and over the last six months, it is 4.1% on an annualized basis, according to Fed statistics. The head of the regulator emphasized that if inflation does not start to approach the target confidently and quickly enough, the central bank will have to continue its current approach.
Market Increases Rate Hike Probability
Following the speech, traders revised their expectations for the Fed’s September meeting. The probability of a rate hike increased from 35.4% the previous day to 57%. The next regulator meeting is scheduled for September 15-16.
Warsh refrained from giving direct signals about upcoming steps, describing the practice of regular monetary policy forecasts as “obsolete.” He argued that excessive guidance from the regulator could create a feedback loop: markets would await cues from the Fed, while the central bank would rely on market prices.
Amid the decline in digital asset prices, the liquidation volume over the past day exceeded $384 million, with the majority coming from long positions—$310 million.
Demand Remains After Rally
Despite the correction, some indicators suggest that investor demand for cryptocurrencies remains. As of August 26, U.S. spot bitcoin-ETFs attracted $2.8 billion over eight consecutive trading sessions. Of this amount, $2.02 billion was attributed to IBIT from BlackRock.
The growth coincided with the U.S. Treasury’s decision to at least double the volume of long-term Treasury securities buybacks.
Starting September 9, the maximum size of a single operation with bonds maturing in 10-30 years will increase from $2 billion to at least $4 billion. The department explained the decision as necessary to support liquidity in the long-term government debt market segment.
Following the announcement, bond yields fell, and the dollar weakened, which boosted risky and alternative assets. In August, bitcoin rose from approximately $62,000 to $80,000.
Future dynamics will depend on the market structure. QCP Capital believes that the key is not just surpassing $83,300, but the nature of the movement—whether driven by spot demand or increased leverage. A gradual increase in open interest with moderate funding rates is considered a healthier scenario than a simultaneous rise in price and leverage.
Earlier, at the end of August, Grayscale’s Head of Research Zach Pandl noted an increased correlation between bitcoin and gold.
