The cryptocurrency market has once again come under pressure. Following a speech by US Federal Reserve Chairman Kevin Warsh, the leading cryptocurrency sharply lost value, pulling back from a local high of $81,455 to the $76,877 mark. At the time of writing, the asset is consolidating around $77,700, demonstrating heightened volatility.
Ether also failed to hold its ground, correcting 2.1% to $2,400. Nearly the entire top-10 list of largest digital assets has turned red, pointing to the systemic nature of the sell-off rather than targeted pressure on individual coins.
Hawkish Signal from the Fed
In his speech, Warsh reaffirmed the regulator's commitment to the 2% inflation target. At the same time, he made it clear that the summer slowdown in CPI and PCE is not a sufficient basis for policy easing. The numbers speak for themselves: the annual growth rate of the personal consumption expenditures price index stands at 3.7%, and on an annualized basis over the last six months, it is 4.1%. This is significantly above the target level.
The key signal for traders was that Warsh did not rule out further tightening if inflation does not begin to decline sustainably. The market reacted instantly: the probability of a rate hike at the September meeting jumped from 35.4% to 57%. The meeting is scheduled for September 15-16, and it now becomes the main trigger for all risk assets.
Liquidations and Institutional Demand
The wave of decline triggered a cascade of liquidations. Over the past 24 hours, the volume of forced position closures exceeded $384 million, of which $310 million came from long positions. This is a classic scenario where an overheated market with excessive leverage is sharply purged.
However, despite the correction, institutional appetite for bitcoin remains. US spot bitcoin ETFs have attracted $2.8 billion over eight consecutive trading sessions, with $2.02 billion of that going into BlackRock's IBIT fund. This inflow coincided with the US Treasury's decision to increase the volume of long-term Treasury buyback operations from $2 billion to $4 billion starting September 9. This supported liquidity and weakened the dollar, which traditionally plays into bitcoin's hands.
The further trajectory will depend on market structure. As analysts at QCP Capital rightly note, what matters is not the mere fact of breaking the $83,300 level, but the nature of the move: spot demand or leverage buildup. A gradual rise in open interest with moderate funding rates looks like a much healthier signal than a synchronized surge in price and leverage.
My comment: The market is entering a phase of high uncertainty ahead of the Fed meeting. The current correction is not panic, but a reassessment of risks. If the regulator does indeed proceed with a rate hike, we could see a deeper decline. However, the continued strong inflow into ETFs indicates that long-term investors view such drawdowns as an entry opportunity.