TLDR
- Bitcoin fell below $113,000 after post-Fed rally momentum quickly reversed
- Jerome Powell’s Jackson Hole speech initially boosted crypto markets with rate cut hopes
- Ethereum surged 9% weekly while Bitcoin dropped 2.56% with heavy ETF outflows
- Technical analysts watch for higher low formation to prevent further downside
- Friday’s PCE inflation data will determine September Fed policy direction
Bitcoin price dropped below $113,000 on Monday as the cryptocurrency’s post-Federal Reserve rally rapidly unwound. The digital asset had initially surged following Jerome Powell’s Jackson Hole speech but failed to maintain momentum.
Powell’s remarks last week boosted investor confidence despite appearing hawkish on paper. His tone shift toward employment concerns led markets to price in September rate cut expectations. Bitcoin initially gained 4% while Ethereum jumped over 13% after the speech.
The Fed Chair signaled an end to the “Average Inflation Targeting” framework that previously allowed inflation above 2%. Powell now demands clear labor market weakness before cutting rates, making future monetary easing more difficult.
Markets focused on Powell’s changed tone rather than hawkish policy details. He repeatedly highlighted labor market downside risks and stressed policy adjustment needs. Powell also dismissed tariff-related price concerns as “transitory.”
Fed Officials Split on Rate Cut Timing
Former St. Louis Fed President James Bullard told CNBC that Powell’s comments essentially signal a 25-basis-point September cut. He suggested room for 100 basis points in cuts through next year.
However, Kansas City Fed President Jeffrey Schmid warned against quick easing. He noted inflation remains closer to 3% than the Fed’s 2% target. Cleveland Fed President Beth Hammack echoed caution, saying she wouldn’t support cuts if voting tomorrow.
Powell himself cautioned any cut shouldn’t start prolonged easing. He stated the Fed won’t allow one-time price increases to become ongoing inflation problems.
Ethereum Outshines Bitcoin Performance
Bitcoin ended last week down 2.56% despite positive macro conditions. The cryptocurrency dropped roughly $10,000 in ten days, showing clear weakness.
Ethereum posted 8.98% weekly gains in contrast. Digital Asset Trading firms showed renewed buying interest in ETH. This divergence appeared in ETF flows as well.
Bitcoin spot ETFs saw $1.178 billion net outflows last week according to Farside Investors. Ethereum ETFs had smaller $241.1 million outflows, showing relative strength.
Bitcoin Price Prediction
Technical analysis suggests Bitcoin faces a decision point. Analyst CryptoMichNL noted Bitcoin needs higher low formation in current regions to preserve momentum. Failure could lead to new lows but create accumulation opportunities.
Bitcoin hit six-week lows at $110,600 before briefly recovering above $113,000. The recovery proved temporary as selling pressure continued.
Friday’s August PCE inflation data release will prove crucial. The Fed’s preferred inflation measure arrives alongside University of Michigan inflation expectations. These indicators will shape September FOMC meeting expectations and Bitcoin price direction.
