coindesk.com
Bitcoin's BTC$79,047.24 surge over the past ten days came after Scott Bessent and his Treasury Department took steps to cap or lower long-term interest rates. The Federal Reserve, though, may have the final say on whether the rally holds or crypto markets give back their recent gains.
The Kansas City Fed's annual Jackson Hole symposium kicked off Wednesday and wraps up with Chairman Kevin Warsh taking the stage Friday morning. He arrives at a crucial moment for markets, with inflation still running well above the Fed’s 2% target, and long-term borrowing costs near multi-year highs as investors try to gauge whether another rate hike is coming.
The Fed has kept its benchmark fed funds rate range steady at 3.50%-3.75% in recent months, while talking a tougher line on inflation. Warsh, meanwhile, has resisted the kind of forward guidance markets have grown used to from the central bank.
This likely won’t change in Wyoming.
Mark Connors, chief investment officer at Risk Dimensions, expects Warsh to focus on his broader overhaul of the Fed rather than tee up a specific rate move. That could include his push to rethink how the central bank measures inflation and communicates with markets.
Connors expects Warsh to leave a rate hike on the table. The Fed’s preferred inflation report, the Personal Consumption Expenditures Price Index, or PCE, released earlier this week, reached 3.7% in July, pushed higher in part by energy prices following the war in Iran.
While traders have raised their bets on a September hike following the report, Connors thinks they’re getting ahead of themselves.
"There will be no hike before midterms," he said.
For bitcoin, the outlook for the September meeting may not be the most important part of Warsh's speech anyway.
"The link is there, but it's indirect," Hashdex chief investment officer Samir Kerbage said.
"Bitcoin doesn't respond to the September decision. It responds to global liquidity and to where the long end of the curve settles, the same channel that drives gold."
The Treasury said last week it would increase purchases of long-dated government debt after the 30-year Treasury yield hit a 19-year high. The announcement helped cool the bond sell-off and fueled bitcoin's move higher. Kerbage called the rally "mostly a liquidity event."
This year's Jackson Hole conference could also be important for crypto traders as the theme centers on financial innovation, payments and policy, putting stablecoins, tokenized deposits and faster settlement systems squarely in the conversation.