Bitcoin briefly fell after Federal Reserve Chair Kevin Warsh warned that inflation remains a concern, but the cryptocurrency quickly recovered most of the decline. The market reaction came as traders reassessed the outlook for U.S. interest rates following Warsh’s first major speech as central bank chief.
Bitcoin traded near $79,474 after touching a low of $78,630. Following the remarks, traders priced in a 50% probability of a rate hike in September, a shift that could normally weigh on risk-sensitive and non-yielding assets such as bitcoin.
Inflation remains the central concern
Warsh said the Federal Reserve still had more work to do to bring inflation under control. After discussing the employment side of the Fed’s mandate, he said: “But on the price-stability side of our mandate, the numbers are more concerning.”
“We ought to be confident that underlying inflation is moving in our direction, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh added.
Bitcoin has historically benefited from lower interest rates, while persistent inflation can reduce the likelihood of monetary easing. Despite the more hawkish rate outlook implied by Warsh’s comments, bitcoin appeared to shrug off the speech after its initial decline.
Bond yields and crypto legislation support sentiment
Bitcoin’s recent rally was also supported by developments outside the Federal Reserve. U.S. Treasury Secretary Scott Bessent announced that the department would double the size of its purchases of longer-dated bonds. The announcement pushed bond yields lower and contributed to a weaker dollar, helping lift non-yielding assets including bitcoin and gold.
Crypto markets also received a boost from comments by President Donald Trump, who described the proposed Clarity Act as a “very, very important” piece of legislation and urged lawmakers to pass it. The bill would establish a framework for determining whether digital assets are securities, commodities or payment stablecoins—categories the crypto industry has long sought to clarify.
Jackson Hole meeting ahead
Market attention will turn next to the Federal Reserve Bank of Kansas City’s annual event in Jackson Hole, Wyoming. Central bankers, policymakers, Federal Reserve officials and academics are scheduled to discuss “Financial Innovation: Implications for Payments and Policy.”
The agenda is expected to address changes in financial intermediation and payments, including the role of cryptocurrencies and stablecoins.
