Bitcoin traders faced a reversal after the cryptocurrency failed to hold above $80,000, as a hawkish Federal Reserve speech and renewed Middle East tensions pushed investors to reassess the outlook for interest rates and risk assets.
Bitcoin fell below $80,000 after Fed Chair Kevin Warsh said that inflation remains too high, saying the Federal Reserve still has “work to do.” He pointed to PCE inflation running at 3.7% year-over-year and accelerating over the previous six months, well above the Fed’s 2% target.
The comments pushed markets to increase bets on another rate hike, with the probability of a September increase rising to around 65%, according to Reuters. Markets are also pricing a high chance of another hike later in the year.
There is also fresh military escalation in the Middle East, with the US striking at Iranian rocket launchers and threats of further action against Iran’s energy infrastructure pushing Brent crude above $90.
President Donald Trump, meanwhile, said Warsh would “do what he has to do” on rates, while arguing that US interest rates are too high.
The timing matters for the OG cryptocurrency because the market had just completed one of its strongest rallies of the year. Bitcoin gained nearly 25% in August, its strongest monthly performance since November 2024, after institutional demand, Treasury Bond Buybacks, and a major short squeeze caused it to rally.
What Happened Around $80,000?
Bitcoin had spent several sessions approaching $80,000 before reaching a high of roughly $81,500. Analysts at VT Markets noted that the cryptocurrency was rejected for a second time at the $81,000-$82,000 supply zone, while momentum indicators began to show signs of fading upside strength.
At the same time, CoinGlass data showed that nearly $488 million in crypto positions were liquidated after Warsh’s speech, with long positions accounting for about $360 million.
As Bitcoin fell through liquidation levels, exchanges automatically closed leveraged longs, adding sell orders to a market already moving lower. That can create a feedback loop in which falling prices trigger liquidations, which in turn create additional selling, and the resulting price decline puts more leveraged positions at risk.
Notably, this is the reverse of the short squeeze that helped drive Bitcoin higher earlier in August, when forced buying from short sellers added to upward momentum.
The difference matters because Bitcoin’s approach to $80,000 attracted traders betting the rally would continue, but once the breakout failed, some of that positioning became a source of supply instead.
Can BTC Sustain $80,000?
Bitcoin was trading around $78,500-$79,000 on September 1, after recovering from the initial Jackson Hole selloff. CoinGlass data showed that leveraged positioning had already declined following the liquidation wave, while US spot Bitcoin ETFs recorded about $924 million in net inflows between August 24 and August 28, suggesting that underlying demand had not disappeared.
Analysts at Titan FX identified $77,400 as four-hour trend-line support, with $79,500 and $80,000 marking the key resistance levels. Others also view $80,000 as a key level, with a sustained break above it potentially opening the way toward the recent $81,300 high and the $82,000-$83,000 zone.
A move back above $80,000 would therefore suggest that buyers are absorbing the supply created by the recent deleveraging and could put $81,000-$82,000 back in play.
A sustained break below $77,000 would be more concerning, particularly if open interest begins rebuilding while prices continue to fall, which would mean that leverage is returning before the market has established stronger support.
For now, Bitcoin’s broader August rally remains intact, but the structure around $80,000 has changed. The next move will now show whether the market can attract enough genuine demand to push through resistance, or whether the failed breakout has left too much leverage behind to support another attempt.
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