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Bitcoin: A post-mortem after Jackson Hole

Last week, we posed the question: “Can Bitcoin stay above $20k after Jackson Hole?

Well, now we have our answer: barely.


As one of the subtitles in last week’s article stated, “Cryptos remain beholden to Fed’s latest policy clues”, sure enough, not just cryptos but risk assets in general  have tumbled following Fed Chair Jerome Powell’s speech delivered this past Friday at the Jackson Hole Symposium.

Our previous article on Bitcoin also carried these lines:

Should Powell signal that more needs to be done to quell the fastest US inflation in 40 years, that could prompt more immediate declines for risk assets, including cryptos. That may even be the catalyst for sub-$20k Bitcoin.”

Powell duly delivered such a ‘hawkish’ message, and Bitcoin tumbled to as low as $19,526.69, before clambering back above the psychologically-important $20k at the time of writing. For context, Bitcoin’s year-to-date drop remains at about 56%.

Bitcoin resurfaces above $20,000 after Jackson Hole


What did Powell signal to markets?

Powell reaffirmed the US central bank’s commitment to hiking interest rates, and keeping them elevated for longer, in the quest to bring down inflation that’s at its highest in 40 years.

Following Powell’s latest comments, markets have since ramped up their expectations for a third-successive 75-basis point hike by the Fed, to be delivered at its September policy meeting, with such odds now placed at 76% compared to the 68% accorded before Friday.

The prospects for a Fed that’s staying aggressive in its inflation battle (with more supersized rate hikes) could translate into an environment whereby risk assets (stocks, cryptos, etc.) may find it hard to hang on to gains.


Bitcoin becoming less volatile, more mature?

At least proponents of Bitcoin may be able to take heart from the apparent decrease of the wild, gut-wrenching price swings that had been long synonymous with crypto prices.

Bitcoin’s drop of as much as 10.7% (which has since been pared) in the aftermath of Powell’s Friday speech, translating into a nominal drop of $2341, extended over four daily sessions.

Contrast that with the 13.8% single-day drop on June 18th earlier this year, or the 15.13% plummet just on June 13th.

According to Bloomberg data, the gap between the intraday highs and lows has fallen into the lowest 5% of Bitcoin’s trading range over the past two years.

Perhaps this lessening volatility may be a sign of Bitcoin’s maturing.

Perhaps this ongoing crypto winter has indeed shaken out most of the so-called “paper hands” in crypto world parlance, leaving more of the ‘diamond hands’ in play.

Whether that actually translates into a stronger floor around $20k remains to be seen.


Can Bitcoin avert another September selloff?

Still, HODL-ers may be in for a rough time ahead as we enter the new month, especially if the Fed reiterates a hawkish outlook at its September policy meeting.

Note that September has typically been unkind for Bitcoin.

It is also the only month out of the entire year whereby Bitcoin has consistently registered a monthly decline over the past 5 consecutive years, with an average monthly drop of 9.84%.

Having already formed a series of lower highs and lower-lows since mid-August, another selloff into September may bring the following support levels into focus next:

  • $18,917.66: July 13th low
  • $18632.10: June 30th low
  • $17599.73: June 18th low


Ultimately, Bitcoin is still expected to continue swaying along with broader risk sentiment.

And if markets continue ramping up their concerns over more incoming Fed rate hikes, especially ones that are “unusually large”, that could yet trigger more losses for Bitcoin.



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