Bitcoin slips near $78K as Fed rate hike odds climb

Bitcoin ↗ 0.07% retreated to around $78,000 on Monday after Federal Reserve Chairman Kevin Warsh's Jackson Hole speech raised the prospect of an interest rate increase at the central bank's Sept. 15–16 meeting, reversing much of the momentum from a rally that had lifted the cryptocurrency more than 24% during August.

Warsh's Warning Shifts Rate Expectations

Warsh used his address at the Jackson Hole Economic Symposium on Friday to warn that the Fed will "have work to do" if policymakers lack confidence that inflation is moving toward the 2% target. While he stopped short of explicitly announcing a hike, markets read the tone as hawkish. Rate futures now price in roughly a 57–60% probability of a 25-basis-point increase at the September meeting, up from about 40% before the speech, according to Reuters. The two-year Treasury yield climbed to around 4.31%, and the dollar moved toward a two-week high.crypto+2

The cryptocurrency had briefly topped $81,000 last week before sliding to an intraday low near $77,400 on Monday. It was trading around $78,500 early on Tuesday, according to market data.dailybeirut+3

ETF Demand Faces a Tougher Test

The pullback came after U.S. spot Bitcoin ETFs recorded $201.9 million in net outflows on Aug. 28, ending a streak of nine consecutive positive sessions that had brought in roughly $3.04 billion. BlackRock's ↗ 0.70% IBIT accounted for $33.4 million of the withdrawals after attracting about $2.3 billion during the preceding run, while ARKB and BITB together saw $164.6 million in redemptions.tradingview+1

Despite Friday's outflows, the funds still finished the week with $924.5 million in net inflows. Bitfinex analysts said the rally had been driven more by spot demand than leverage, leaving the market in a "relatively balanced" position. Jeff Ko, chief analyst at CoinEx, said the mechanical effect of forced short covering tied to earlier Treasury buybacks has "largely played out" and that the $80,000–$83,000 zone will test whether real buyers continue to absorb supply.crypto

Data-Heavy Week Ahead of September Meeting

Attention now turns to a packed U.S. economic calendar. ISM Manufacturing and JOLTS data are due Tuesday, followed by ADP employment and the Fed's Beige Book on Wednesday, ISM Services on Thursday, and the August payrolls report on Friday — the final jobs release before the FOMC decision. The August inflation report, due Sept. 11, will provide another data point just days before the meeting.crypto

Jeff Mei, chief operating officer of BTSE, told crypto.news that sustained ETF demand across multiple funds and softer inflation readings are both necessary for the rally to resume. "For a sustained rally, we need a few things to happen," Mei said. "First, ETF demand has to stay strong across all ETF products, and not just BlackRock's IBIT ETF. Second, we need better inflation data for the Fed to back off and keep rates steady."crypto