Bitcoin fell approximately $3,000 on Friday, triggering over $200 million in hourly liquidations, after Federal Reserve Chair Kevin Warsh said inflation trends have not meaningfully improved. Fed funds futures traders now price a 60 percent chance of a September rate hike, up from 35.4 percent a day earlier. Altcoins followed lower, with XRP down 5 percent on the day.
Bitcoin fell approximately $3,000 on Friday, triggering $200 million in hourly liquidations, after Federal Reserve Chair Kevin Warsh said inflation trends have not meaningfully improved.
"While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved," Warsh said at the central bank's annual symposium in Jackson Hole, Wyoming. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do."
Fed funds futures traders raised the probability of a September rate increase to 60 percent on Friday, up from 35.4 percent a day earlier, according to CME Group's FedWatch tool. The S&P 500 fell 0.3 percent while the Nasdaq Composite slid 0.5 percent, weighed down by semiconductor losses. XRP dropped 5 percent on the day.
The shift in rate expectations marks a sharp reversal from earlier this week, when 69 percent of fund managers surveyed by Bank of America expected Warsh to maintain a neutral stance. With the Fed's next decision 19 days away, traders now face the prospect of higher-for-longer rates, a scenario that historically pressures risk assets including cryptocurrencies.
The liquidation cascade hit $200 million within an hour as leveraged long positions were unwound across major exchanges. The 30-year Treasury yield sits near its highest level since 2007, adding pressure to long-duration assets. Treasury Secretary Scott Bessent has expanded buybacks of longer-dated securities, drawing attention to the relationship between the Treasury market and monetary policy. The Fed itself is divided on the outlook, with a recent policy meeting including one of the strongest hawkish dissents in years.
Coin Bureau, a crypto research firm, had expected Warsh to sound somewhat more dovish than markets anticipated, suggesting Bitcoin could attack $80,000 if the Fed indicated rate cuts remain possible. Instead, the hawkish tone pushed rate hike expectations sharply higher, reversing that scenario. The $80,000 level now serves as a key resistance point for traders watching whether the sell-off extends or reverses.
Bill Birmingham, managing director at REX Financial, said Warsh's comments about the composition of CPI show "that he is very much looking for consensus internally to raise rates."
The next key level for Bitcoin traders is whether the sell-off extends below recent support or finds buyers at current levels. With the Fed's September meeting now 19 days away, the path of least resistance for risk assets may depend on incoming inflation data and whether Warsh's hawkish tone persists. A dovish pivot in the coming weeks could revive the case for rate cuts, while continued hawkish messaging would keep pressure on digital assets.
This article is for informational purposes only and does not constitute investment advice.
