In the wake of remarks by Federal Reserve Chairman Kevin Warsh, Bitcoin's price fell from a local high of $81,455 to $76,877. As of this writing, the cryptocurrency is trading at approximately $77,700.

Hourly chart of BTC/USDT from Binance. Source: TradingView.

Ethereum also saw a decline of 2.1%, dropping to $2,400. Most major cryptocurrencies by market capitalization were found in the "red zone."

Source: CoinMarketCap.

During his speech, Warsh reiterated the Fed's commitment to maintaining an inflation target of 2%. He noted that weak summer data regarding the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) do not indicate a significant improvement in the underlying trend.

Currently, the annual growth rate of the Personal Consumption Expenditures index stands at 3.7%, while the rate for the past six months, annualized, is 4.1%, according to Federal Reserve statistics. Warsh emphasized that if inflation does not begin to approach the target steadily and swiftly, the central bank will have to continue its current approach.

Market Raises Odds of Rate Hike

Following Warsh's address, traders adjusted their expectations for the September Fed meeting. The likelihood of a rate hike increased from 35.4% the previous day to 57%. The next meeting of the Federal Reserve is scheduled for September 15-16.

Source: CME FedWatch.

Warsh refrained from giving direct signals regarding immediate actions, describing the practice of regular monetary policy forecasting as "outdated." He suggested that excessive guidance from the Fed could create a feedback loop where markets await hints from the central bank, which in turn would rely on market prices.

As digital asset prices fell, liquidations over the past day exceeded $384 million, with the majority—$310 million—stemming from long positions.

Source: CoinGlass.

Demand Remains After Rally

Despite the recent correction, some indicators suggest that investor demand for cryptocurrencies persists. By August 26, U.S. spot Bitcoin ETFs had attracted $2.8 billion over eight consecutive trading sessions, with $2.02 billion coming from BlackRock's IBIT.

Source: SoSoValue.

This surge coincided with the U.S. Treasury's decision to at least double the volume of buyback operations for long-term Treasury securities.

Starting September 9, the maximum size for a single operation involving bonds with maturities of 10-30 years will increase from $2 billion to at least $4 billion. The department explained this move as necessary to support liquidity in the long-term segment of the government debt market.

Following the announcement, bond yields decreased, and the dollar weakened, which boosted riskier and alternative assets. In August, Bitcoin surged from approximately $62,000 to $80,000.

The future trajectory will depend on market structure. According to QCP Capital, it is not merely the crossing of $83,300 that matters, but rather the nature of the movement—whether driven by spot demand or leveraged positions. A gradual increase in open interest alongside moderate financing rates is viewed as a healthier scenario than a simultaneous rise in price and leverage.

It is worth noting that at the end of August, Grayscale's head of research, Zach Pandl, highlighted a growing correlation between Bitcoin and gold.