Bitcoin Plunges on Hawkish Tone, Rate Hike Odds Rise Ahead of Jackson Hole

QCP Capital's market report revealed that following Fed Chairman Warsh's speech at Jackson Hole, the probability of a September rate hike rose from 35% to 70%. Bitcoin (BTC) dropped by around 2.5% in value on the same day, while the ETF recorded a net outflow of $202 million after nine consecutive days of net inflow.

However, the dollar failed to maintain its hawkish tone and DXY retreated below 99.5. As a result, gold, silver, and BTC all recovered their losses. On the fiscal side, on September 9, the Treasury Department will launch its first long-term liquidity operation, with a purchase ceiling increased to at least $4 billion from the previous $2 billion.

The market will closely watch whether this operation can effectively improve long-term liquidity. In terms of inflation, July's PCE index reported 3.7% (core 3.3%), while CPI came in at 3.4% (core 2.5%). Brent crude oil rose by around 10% due to the Houthi attack on the Hormuz Strait and Qatar's LNG supply disruptions.

Waller stated that if future data continues along this trend, it would support a pause in rate hikes, combined with an ADP employment reading of only 38,000 (the weakest since January). As a result, the probability of a September rate hike has fallen to 45-50%.