Fed Chair Kevin Warsh triggers a $488 million crypto liquidation cascade as rate-hike expectations rise

Bitcoin fell below $77,000 Friday after Fed Chair Kevin Warsh revived the threat of higher interest rates at Jackson Hole.

Data from CryptoSlate shows the largest cryptocurrency dropped to as low as $76,909 before recovering to $77,712 as of press time, down about 4% over the previous 24 hours. The retreat accelerated a broader crypto deleveraging that erased nearly $488 million from derivatives traders.

The selloff followed a sharp repricing of Federal Reserve expectations. Traders lifted the probability of a September rate increase to about 60% from roughly 35% before Warsh spoke, while short-term Treasury yields rose and the dollar strengthened.

Warsh says financial conditions may still be too loose

Warsh gave markets several reasons to reconsider expectations that the Fed was moving toward easier policy, arguing that inflation remains too high even after better price readings this summer.

The Fed's preferred personal consumption expenditures price index is running at 3.7% over the past year and at a 4.1% annualized pace over the past six months, both well above the central bank's 2% target.

Recent inflation reports had not persuaded Warsh that the underlying trend had changed. He said: