Bitcoin’s short-lived rally following Federal Reserve Chair Jerome Powell’s Jackson Hole speech has already unraveled, with the world’s largest cryptocurrency tumbling to a six-week low of around $110,600 early Monday in Asia.
The drop wiped out gains from late last week, when Powell’s unexpectedly cautious remarks about the labor market fueled optimism for a September rate cut. Ethereum, which had outperformed Bitcoin in recent sessions, also gave up ground in the broad pullback.
Powell’s Jackson Hole Speech: Hawkish on Paper, Dovish in Tone
Markets initially cheered Powell’s comments on Friday. While the Fed formally ended its “Average Inflation Targeting” framework—making it harder to justify inflation above 2%—Powell repeatedly emphasized risks to employment, a notable shift from his earlier, inflation-first stance.
That softer tone led traders to price in a September cut. Former St. Louis Fed President James Bullard even told CNBC the remarks amounted to a “done deal” for a 25-basis-point reduction, with scope for as much as 100 basis points in easing through 2025.
Not everyone is convinced. Kansas City Fed President Jeffrey Schmid cautioned in a Yahoo Finance interview that inflation is still closer to 3% than 2%, warning that “cutting rates too soon could reignite demand.” Cleveland Fed President Beth Hammack echoed that concern, saying if the decision were made today, she “would not see a case for reducing interest rates.”
Bitcoin Weakens, Ethereum Steals the Spotlight
Despite the upbeat macro backdrop last week, Bitcoin ended down 2.56%, sliding nearly $10,000 in just 10 days. Spot Bitcoin ETFs reflected the pressure, with $1.178 billion in net outflows, according to Farside Investors.
Ethereum told a different story. It rallied nearly 9% on the week, buoyed by buying from digital asset trading firms and smaller net ETF outflows of $241 million. Analysts say Ethereum’s relative strength could be tied to institutional positioning, though questions remain about whether it can sustain momentum if Bitcoin continues to falter.
Key Test Ahead: August PCE Inflation
The immediate focus now shifts to U.S. economic data. On Friday, markets will get the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, along with the University of Michigan’s inflation expectations survey.
Both reports are likely to influence how firmly the Fed leans toward a September cut. For crypto traders, the readings could determine whether the latest pullback is a temporary dip—or the start of a “September slump” often seen in risk assets.
Bottom Line
Bitcoin’s dip below $113,000 shows how fragile market sentiment remains, even with growing expectations for Fed easing. Ethereum’s outperformance is notable, but with key inflation data on deck, volatility could intensify across digital assets this week.
