Bitcoin rallies past $80K as Fed signals rate pause
In brief
- Bitcoin traded near $80,270, up 3% in 24 hours, after Fed Governor Waller backed rate pause if inflation improves
- $415 million in short positions liquidated; 119,000+ traders wiped out as markets squeezed higher
- S&P 500 and Nasdaq each gained ~1%, Dow up 453 points on softer rate expectations
Rate Pause Shifts Market Odds
Waller's dovish signal moved the needle hard. Odds of a September rate hike fell to 50.4%, down from 63.2% a day earlier, according to CME FedWatch data. The shift came as the 10-year Treasury yield dropped to around 4.73%, easing borrowing-cost pressures across markets.
Ethereum closed in on $2,500, up 2.2% on the day, while XRP surged 6% in 24 hours. Stocks moved in lockstep. The S&P 500 and Nasdaq each gained close to 1%, and the Dow climbed 453 points, or 0.9%. Tech stocks led the charge—Nvidia confirmed a roughly $13 billion deal to acquire AI model hub Hugging Face, while Snowflake shares soared on stronger-than-expected earnings.
The Liquidation Cascade
The rally came with pain for leveraged shorts. More than $415 million in short positions were liquidated in the past 24 hours, according to liquidation data. Broader numbers were even starker: over $500 million in liquidations hit crypto markets in 24 hours—$416 million from shorts and $92 million from longs. More than 119,000 traders were liquidated in the past day.
The squeeze happened in waves. More than $329 million in shorts were liquidated in a single hour, with $86 million from Bitcoin bets alone. This mirrors the mechanic from last month, when a $570 million liquidation wave hit as Bitcoin rebounded from around $57,000.
What's Next
The Fed's September 15-16 meeting looms large. The Bureau of Labor Statistics releases the August jobs report Friday morning, the last major economic release before that meeting. Waller noted that job creation has averaged 60,000 a month through July—softer than the Fed's historical comfort zone.
The context matters. An interest rate hike would be the Fed's first since July 2023, when it raised the benchmark rate to a 22-year high of 5.25% to 5.50%. Waller's comments reversed the damage from earlier this week, when Fed Chair Kevin Warsh's hawkish Jackson Hole keynote knocked Bitcoin down to $76,877 and pushed hike odds toward 56%.
"said he'd be "inclined to support" holding the Fed's benchmark interest rate at its current level if upcoming inflation data keeps improving." — Fed Governor Christopher Waller
The mechanics are straightforward. Higher interest rates make cash and bonds more attractive, pulling capital away from riskier assets like stocks and crypto. Rate-pause signals do the reverse—they flip the incentive structure, letting traders rotate back into growth and leverage without fighting the Fed headwind.
