Bitcoin's $81,000 Breakthrough Fizzles as Fed Fears Return

Bitcoin's push above $81,000 has fizzled out as fears of higher US interest rates resurface. The cryptocurrency had rallied over 20% from around $62,000 in a week, driven by renewed institutional buying and a broader shift towards alternative assets.

The attempt to break through the $80,000 level was met with resistance after Federal Reserve Chair Kevin Warsh reinforced the central bank's commitment to bringing inflation back to its 2% target. His comments sparked increased bets that the Fed could raise interest rates at its September meeting, causing the two-year Treasury yield to jump and the dollar to strengthen.

Higher interest rates generally present a headwind for cryptocurrencies, increasing returns on cash and government bonds. This had an impact across crypto-linked equities, with Coinbase, Galaxy Digital, and several Bitcoin miners falling sharply. However, institutional demand remains strong, with US spot Bitcoin exchange-traded funds recording eight consecutive sessions of net inflows totaling around $2.8 billion.

Bitcoin now faces a significant technical test, with the $81,000 to $86,000 region identified as a major area of potential selling pressure. A sustained move above $83,300, accompanied by continued ETF inflows, would provide stronger evidence that buyers are absorbing supply.