Fed Chair Warsh's Jackson Hole remarks trigger $488 million crypto liquidation
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Bitcoin fell below $77,000 on Friday after Federal Reserve Chair Kevin Warsh signaled that interest rates may need to rise further. The remarks triggered nearly $488 million in crypto derivatives liquidations. The selloff came as traders raised the probability of a September rate increase to about 60%.
Key Facts
- Bitcoin dropped to as low as $76,909 before recovering to $77,712, down about 4% over 24 hours.
- CoinGlass recorded $487.68 million in liquidations across the crypto market in 24 hours, affecting 97,691 traders.
- Traders lifted the probability of a September Fed rate increase to about 60% from roughly 35% before Warsh spoke.
- The Fed's preferred inflation gauge, the personal consumption expenditures price index, is running at 3.7% over the past year and 4.1% annualized over six months.
- Warsh said the 4.1% unemployment rate is historically low and consistent with full employment.
Warsh's Hawkish Message
Federal Reserve Chair Kevin Warsh said at Jackson Hole that inflation remains too high even after better price readings this summer. He stated that 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. Warsh added that he would be hard pressed to describe broad financial conditions as restrictive, citing narrow corporate bond spreads and relatively easy bank lending standards. He described labor conditions as consistent with full employment and said the Fed's predominant focus right now should be on prices.
Crypto Market Impact
Bitcoin fell below $77,000 on Friday, dropping to as low as $76,909 before recovering to $77,712, down about 4% over the previous 24 hours. CoinGlass recorded $487.68 million of liquidations across the crypto market during the previous 24 hours, affecting 97,691 traders. More than $200 million in positions were closed within one hour after Warsh's speech. The two-year Treasury yield climbed to a one-month high after the remarks as investors increased bets on another rate increase.
Market Reaction
Bitcoin slipped back below $80,000 on Friday after Warsh pledged to bring inflation back to target, pushing short-term Treasury yields higher. Jasper De Maere, OTC trader at Wintermute, said the market is digesting the speech relatively well and that it fell in line with expectations. The open interest for Bitcoin futures has not seen a significant recovery after last week's record liquidation in leveraged bearish bets, according to data from Coinglass. Gold prices accelerated their decline after Warsh's remarks as expectations strengthened that the Fed could implement tighter monetary policy.
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Fed Chair Warsh's Jackson Hole remarks trigger $488 million crypto liquidation
