Bitcoin and Gold Reversal: Fed Hawkishness Shifts Debasement Trade
The recent rally in Bitcoin and gold has come to an end after Federal Reserve Chairman Kevin Warsh's hawkish speech at Jackson Hole. Both assets had climbed together as investors sought safe-haven assets due to debasement fears, but Warsh's comments on inflation have changed the game.
Warsh stated that 'inflation is running above our 2 percent target,' and emphasized the Fed's focus should be on prices. This shift in tone has increased the likelihood of a September rate hike, with CME FedWatch data now putting the probability at 62.6%.
The rise in policy rates will increase the opportunity cost of holding assets that generate no yield, such as gold and Bitcoin. The two assets had previously been trading together, but this latest development may signal a change in their relationship.