The cryptocurrency market has once again come under pressure from the macroeconomic context. After a speech by U.S. Federal Reserve Chairman Kevin Warsh, the leading cryptocurrency made a sharp reversal from its local high of $81,455, plunging to the level of $76,877. At the time of writing this analysis, the asset is consolidating around $77,700, demonstrating heightened volatility.
Ether corrected by 2.1%, dropping to $2,400. Nearly the entire list of the top-10 altcoins by market capitalization has moved into the "red zone," confirming the systemic nature of the downward momentum.
Betting on a hike: the market shifts expectations
The key trigger for the decline was the stance of the Fed Chair, who reaffirmed commitment to the 2% inflation target. At the same time, Warsh noted that weak summer CPI and PCE data do not indicate a significant improvement in the underlying trend. The numbers speak for themselves: the annual growth of the personal consumption expenditures index stands at 3.7%, and on an annualized basis over the past six months — 4.1%. The regulator sent a clear signal: if inflation does not begin to rapidly approach the target, the central bank will continue tightening.
The market instantly revised its forecasts. The probability of a rate hike at the September meeting jumped from 35.4% to 57%. Notably, Warsh himself refrained from direct signals, calling the practice of regular forecasts "outdated" and emphasizing the danger of a vicious cycle where markets await hints from the regulator, while it looks to market prices.
Liquidations and institutional demand
The wave of sell-offs triggered massive liquidations: over the past day, the total volume exceeded $384 million, of which $310 million came from long positions. This is a classic scenario for a market overloaded with leverage.
However, not everything is so clear-cut. Despite the correction, institutional demand remains resilient. U.S. spot bitcoin ETFs recorded an eight-day streak of inflows totaling $2.8 billion by August 26, with $2.02 billion of that going to BlackRock's IBIT fund. This surge coincided with the U.S. Treasury's decision to increase the volume of buyback operations for long-term Treasury securities — the maximum size of a single transaction will rise from $2 billion to $4 billion starting September 9. This decision supported liquidity in the government debt market, weakened the dollar, and spurred risk assets.
The further dynamics of bitcoin will be determined by the market structure. What matters is not just breaking through the $83,300 level, but the nature of the move — driven by spot demand or by building up leverage. A gradual increase in open interest with moderate funding rates looks like a much healthier scenario than a synchronized rise in both price and leverage.
My analysis: The market is in a phase of high sensitivity to monetary policy. The current correction is not a trend reversal, but a reassessment of risks ahead of the Fed meeting. If institutional inflows persist, bitcoin has every chance to recover, but in the short term, volatility will remain elevated.