Bitcoin Recovers After Initial Drop Following Fed Chair's Inflation Remarks

Bitcoin fell before rebounding after Federal Reserve Chair Kevin Warsh delivered his inaugural major address as head of the central bank, stating there was "more work to do" on inflation.

The top digital asset was trading at $79,474, having dipped to $78,630 before recovering swiftly.

Bitcoin has historically performed well under low interest rates, but the Federal Reserve has been hesitant to reduce borrowing costs because of persistent inflation in the world's largest economy.

"But on the price-stability side of our mandate, the numbers are more concerning," Warsh remarked after discussing employment.

He added: "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do."

In the past, bitcoin has declined when the Federal Reserve signals that inflation remains elevated, as it reduces the likelihood of a rate cut. Following Warsh's address, traders assigned a 50% probability to a rate increase in September.

Yet bitcoin appeared to have shrugged off the speech, at least temporarily.

Bitcoin began rallying last week after U.S. Treasury Secretary Scott Bessent announced the department would double the scale of its long-dated bond buyback program.

That announcement pushed yields downward, while the dollar weakened and non-yielding assets such as bitcoin and gold rose.

Positive regulatory developments also supported the cryptocurrency: President Donald Trump last week called the long-awaited crypto Clarity Act a "very, very powerful" piece of legislation and urged lawmakers to pass it.

The proposed law would create a framework for categorizing digital assets as securities, commodities or payment stablecoins — a move the crypto sector has long sought.

The Federal Reserve Bank of Kansas City is hosting its annual event on Friday at Jackson Hole, Wyoming, where central bankers, Fed officials, policymakers and academics will discuss "Financial Innovation: Implications for Payments and Policy."

According to the Kansas City Fed's website, this year's gathering will address how "recent years have seen a dramatic increase in innovation in financial intermediation and payments," including emerging technologies such as "cryptocurrencies and stablecoins."