Bitcoin Pulls Back After Jackson Hole as Fed Stays Tough on Inflation

Bitcoin retreated sharply on Friday after Federal Reserve Chair Kevin Warsh delivered a more cautious message on inflation at his first Jackson Hole keynote, wiping out much of the cryptocurrency’s double-digit weekly advance.

BTC dropped to $76,877 after reaching an overnight peak of $81,455. The move once again highlighted the stubborn resistance around the $81,000-$82,500 area, which has stopped several attempts to push Bitcoin into fresh highs this year.

Warsh did not offer markets a new roadmap for monetary policy on his 100th day as Fed chair. Instead, he stressed that the central bank still needs clearer evidence that inflation is heading toward its 2% target at a sufficient pace before policymakers can consider their work finished.

That was enough for traders to turn more defensive.

Markets quickly interpreted the remarks as hawkish. According to CME Group's FedWatch tool, the probability of a September rate hike climbed to 55.7%, up from 35.4% the previous day.

The shift in expectations hit leveraged crypto traders particularly hard. CoinGlass data showed approximately $481 million in cryptocurrency liquidations over the 24-hour period surrounding the speech. Long positions accounted for more than $360 million of the total as Bitcoin's sudden decline caught bullish traders off guard.

Bitcoin ultimately finished the session at $77,557, marking a 3.39% daily decline.

Still, the technical picture has not yet turned decisively bearish.

Bitcoin's Relative Strength Index stands around 69.7, below the 80-plus level that accompanied the sharper rejection earlier in the week. The Average Directional Index, meanwhile, remains near 39.5, suggesting the broader trend retains considerable strength.

The current price action also remains within the bullish move that began with June's low around $68,858 and carried BTC to this week's $81,455 high.

If selling continues, traders are likely to focus first on the $73,670-$75,157 region. A sustained close below that area could weaken the current structure and bring Bitcoin's 50-week moving average back into focus.

On the upside, reclaiming the $81,000-$82,500 resistance zone would be important for bulls. A successful breakout above that range could reopen the path toward fresh highs.

There is also evidence that longer-term market expectations remain firmly tilted toward the upside.

Prediction markets BTC next move has recorded roughly $231,000 in trading volume since launching in February. The market compares the chances of Bitcoin reaching $84,000 with a decline to $55,000.

The balance has shifted heavily in favor of the upside this month. The probability assigned to the $84,000 outcome has climbed by 31.7 percentage points to 77%, leaving the $55,000 scenario at 23%.

Friday's rejection from resistance did little to change that outlook.

Institutional demand provides another important part of the bullish argument. U.S. spot Bitcoin ETFs recorded $2.8 billion in net inflows over eight consecutive trading days through Wednesday, marking their longest winning streak since April.

Those flows have coincided with improving conditions across traditional markets. The U.S. Treasury's decision to at least double its long-term bond buybacks from September 9 has helped support the longer end of the Treasury market, where demand had weakened since June.

Falling long-term yields and a softer U.S. dollar have also revived the so-called debasement trade, helping Bitcoin climb from roughly $62,000 to around $80,000 during August.

Warsh's comments have not fundamentally removed those forces. He offered no specific timetable for rate moves and instead emphasized that inflation still has further to fall.

That leaves Bitcoin in a potentially volatile position heading into the next Federal Reserve decision. Without clear forward guidance, traders may react more aggressively to every inflation and economic-data release in the weeks ahead.

The challenge is straightforward. U.S. inflation, measured by the PCE price index, remains around 3.7% annually, significantly above the Fed's 2% target.

For Bitcoin bulls, the immediate task is therefore to defend the mid-$70,000s and eventually break through the resistance that has repeatedly capped rallies.

The larger trend, however, has not been broken. Friday's selloff may be a sharp correction rather than the beginning of a deeper reversal.