Why Bitcoin Crashed After Warsh’s Jackson Hole Speech – and What Happens Next

Bitcoin’s rally from under $65,000 to over $81,000 faced its first major macro setback after Fed Chair Kevin Warsh delivered a hawkish message at Jackson Hole on Friday. The bigger question now is whether potentially higher rates and rising Treasury yields can derail the impressive market recovery.

Although $BTC remained relatively stable during the speech, it dumped by $3,000 in hours after its conclusion, slipping below $77,000 for the first time in almost a week. The sell-off extended to essentially all other financial markets, including stocks, precious metals, and other risk-sensitive assets.

So, What Really Happened?

Warsh didn’t say directly that the Fed is seriously contemplating hiking the rates, but he didn’t have to. His message was quite clear: inflation remains too high, the US economy is still strong, and the Federal Reserve cannot simply declare victory. Its preferred PCE inflation gauge currently stands at 3.7% YoY, while its six-month annualized rate is even higher at 4.1%. Both remain far above the central bank’s target.

He emphasized that the Fed’s 2% inflation objective is “firm and fixed” and argued that price stability won’t simply restore itself without additional actions from the central bank.