Bitcoin Plunges Below $113K As Post-Fed Euphoria Evaporates Instantly

Bitcoin's brief celebration following the Fed's latest move just hit a brutal reality check—dropping under the $113K threshold in a sharp reversal that left traders scrambling.

The Fed-induced sugar rush didn't last. Almost immediately after the initial surge, selling pressure mounted, wiping out gains and pushing Bitcoin back below key psychological support.

Classic crypto volatility meets traditional finance theatrics. Because nothing says 'stable monetary policy' like a 10% swing before your coffee gets cold.

This isn't just a dip—it's a reminder that in crypto, what the Fed gives, the market can take away in seconds. Welcome to digital asset investing, where the only certainty is unpredictability.

A Market Reversal: All Eyes on Fed’s Pivot

After digesting Federal Reserve Chair Jerome Powell’s much-anticipated Jackson Hole speech, the cryptocurrency market turned positive last week.

Powell’s perceived tone shift and rising September rate cut expectations sent risk assets, including Bitcoin, soaring despite his potentially hawkish address.

Jay Powell’s speech at Jackson Hole had many fearing a long-term hawkish stance, but the outcome was surprisingly optimistic. Bitcoin jumped roughly 4% and ethereum surged over 13% after the speech as investors focused on Powell’s subtly changed demeanor over hawkish details.

The Fed signaled the end of its “Average Inflation Targeting” (AIT) framework in a significant policy shift. This policy had previously allowed it to tolerate inflation moderately above the 2% target. The central bank signaled a cautious stance, demanding significant labor weakness before cutting rates.

These changes were bearish on paper, making future monetary easing more difficult. Yet, the market rallied. The primary reason was a notable change in Jerome Powell’s tone.

As recently as the July FOMC meeting, Powell had firmly prioritized inflation, drawing a clear line against imminent rate cuts. At Jackson Hole, however, he repeatedly highlighted the downside risks to the labor market. He stressed the need for policy adjustments, which many saw as a signal for rate cuts.

Powell also downplayed concerns about potential price increases from the TRUMP administration’s tariff policies, labeling them “transitory.” He argued that a cooling labor market would prevent these temporary price shocks from translating into long-term inflation.

This was widely seen as a signal that the Fed now emphasizes employment stability over strict inflation control.

September Rate Cut a “Done Deal”?

Comments made shortly after Powell’s speech cemented the market’s euphoria. James Bullard, former president of the St. Louis Fed and a prominent voice on monetary policy, stated in a CNBC interview that Powell’s remarks essentially signal a 25-basis-point rate cut in September.

Bullard’s commentary erased any lingering doubts for many investors. He further fueled expectations for an easing cycle by suggesting there could be room for up to 100 basis points in cuts through next year.

Powell noted that any potential cut should not be considered the start of a prolonged easing cycle. “Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” he stated. This might suggest that the Fed can consider a maximum of two cuts this year.

However, there are still opinions that the Fed should refrain from further lowering the rate. Kansas City Fed President Jeffrey Schmid, in Yahoo Finance’s interview, stressed that while the labor market shows some cooling, he sees inflation still closer to 3% than the 2% target and warns against easing too quickly.

Schmid said, “We still have a long mile yet to get inflation toward 2%. Cutting rates too soon could reignite demand and give firms greater pricing power.”

Cleveland Fed President Beth Hammack emphasized that inflation remains too high and upward, while the labor market is stable at around 4.2% unemployment. In Yahoo Finance’s interview, she said, “If the meeting were tomorrow, I WOULD not see a case for reducing interest rates.”

Ethereum Outshines, But Can it Last?

Last week saw a clear divergence in the crypto market, with Ethereum’s strength overshadowing a lackluster Bitcoin. Despite the positive post-Jackson Hole macro environment, Bitcoin ended the week down 2.56%, marking a sharp drop of about $10,000 in just ten days.

In stark contrast, Ethereum posted a weekly gain of 8.98%, with data suggesting new buying interest from Digital Asset Trading (DAT) firms.

This trend was also reflected in US spot ETF flows. According to Farside Investors, bitcoin spot ETFs saw significant net outflows of $1.178 billion last week. Ethereum spot ETFs, meanwhile, saw much smaller net outflows of just $241.1 million.

While some analysts, like those at VanEck, maintain a bullish year-end price target of $180,000 for Bitcoin, current market momentum appears to favor Ethereum.

This Week’s Key Indicator: August PCE Inflation

Right before the opening of Asian daytime trading on Monday, Bitcoin plummeted to a six-week low of $110,600, erasing Friday’s gains. Most altcoins, including the previously strong Ethereum, were dragged down alongside Bitcoin’s sudden decline. Bitcoin temporarily recovered above $113,000, but fell back down the line as of reporting time.

While Powell has opened the door to a September cut, his cautious tone suggests the decision is not yet set in stone. The market’s following global reaction today, as the initial excitement from Friday fades, will set the tone for risk assets this week.

Despite Ethereum’s strong momentum, some market experts are wary of a potential “September slump.”

This Friday will be crucial. The August Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, will be released, and the University of Michigan’s inflation expectations survey will also be released on the same day.

These two indicators will provide essential clues for gauging the economic landscape ahead of the September FOMC meeting. We wish all our readers a successful week of investing.