Bitcoin fell and then quickly recovered after Federal Reserve Chair Kevin Warsh, in his first major speech as head of the U.S. central bank, said the inflation fight was not finished. The largest cryptocurrency was recently trading at $79,474 after dropping as low as $78,630.
The report says bitcoin has typically performed well in a low-rate environment, but the Federal Reserve has been reluctant to cut borrowing costs because inflation in the world’s largest economy remains sticky.
After discussing employment, Warsh said, “But on the price-stability side of our mandate, the numbers are more concerning.” He added, “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”
Traders priced in a 50% chance of a September rate hike
Bitcoin has previously fallen on news that the Federal Reserve sees inflation as too high, since that lowers the odds of a rate cut. Following Warsh’s speech, traders priced in a 50% chance of a rate hike in September. Even so, bitcoin appeared, at least for now, to shake off the remarks rather than extend the drop.
Recent gains were also tied to bond buybacks and regulatory developments
The story says bitcoin began surging last week after U.S. Treasury Secretary Scott Bessent announced that the department would double the size of its long-dated bond buybacks. That news pushed yields lower, sent the dollar down and lifted non-yielding assets such as bitcoin and gold.
Regulatory news also supported the move. President Donald Trump said last week that the long-awaited crypto Clarity Act was a “very, very powerful piece of legislation” and urged lawmakers to get it over the line.
According to the report, the proposed law would establish a framework for distinguishing between digital assets that are securities, commodities or payment stablecoins, a form of legislation the crypto industry has long sought.
Jackson Hole event will include cryptocurrencies and stablecoins
The Federal Reserve Bank of Kansas City is holding its annual event on Friday in Jackson Hole, Wyoming, where central bankers, Federal Reserve officials, policymakers and academics will gather to discuss “Financial Innovation: Implications for Payments and Policy.”
According to the Federal Reserve Bank of Kansas City website, this year’s event will address the sharp increase in innovation in financial intermediation and payments in recent years, including new technologies such as cryptocurrencies and stablecoins.
The article first appeared in Bitcoin Magazine and was written by Mathew Di Salvo.