Bitcoin Breaks $80K Then Gives It Back as Hot Inflation Hits Crypto

Bitcoin’s return above $80,000 didn’t last long. BTC surged as high as $81,235 on August 26 before hotter-than-expected U.S. inflation data sent Bitcoin back below $78,000 and dragged crypto-related stocks including Coinbase, Strategy, Circle and MARA lower.

The reversal came after the latest Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, showed price pressures remain stubbornly above the central bank’s 2% target.

Bitcoin Falls From $81K After PCE Report

Bitcoin entered Wednesday with significant momentum following its massive rally over the previous week.

BTC briefly reached $81,235, marking its first move above $80,000 since May. But the rally reversed as soon as traders digested the new inflation numbers. 

July’s PCE report showed:

• Headline PCE: +0.2% month-over-month versus +0.1% expected
• Annual PCE: 3.7% versus 3.6% expected
• Core PCE: +0.2% month-over-month, matching expectations
• Annual core PCE: 3.3%, also matching expectations
• The Fed’s inflation target remains 2%

Bitcoin fell below $78,000 following the report before recovering slightly around the $78,000 level.

The move triggered approximately $24.4 million in crypto liquidations shortly after the report, including about $21.5 million from traders betting prices would continue higher. 

Coinbase, Strategy and Crypto Stocks Take a Hit

The risk-off reaction wasn’t limited to cryptocurrencies.

Crypto-related stocks also gave back some of the substantial gains they accumulated during Bitcoin’s recent rally.

Among the biggest declines during Wednesday’s session:

• American Bitcoin: down roughly 8%
• MARA Holdings: down around 6.5%
• Circle: down roughly 4.5%–5%
• Strategy: down around 4%
• Coinbase: down approximately 4%

Ethereum, XRP, Solana and BNB also moved lower as investors reduced exposure to riskier assets.

Hot Inflation Raises Rate Hike Fears

The problem for crypto isn’t necessarily the small inflation miss itself.

It’s what the numbers could mean for Federal Reserve interest rates.

Higher interest rates generally make safer yield-producing assets more attractive while increasing borrowing costs and reducing liquidity available for speculative investments such as cryptocurrencies and growth stocks.

Following the PCE report, federal funds futures showed the market-implied probability of a September rate hike increasing from roughly 36% to 44%. Traders were also pricing in a rate increase by the end of the year. 

Treasury yields and the U.S. dollar moved higher as investors adjusted those expectations.

Bitcoin’s $80K Breakout Faces Its First Major Test

The pullback comes immediately after one of Bitcoin’s strongest rallies in years.

BTC surged from roughly $63,000 last week to above $80,000, meaning Wednesday’s decline is occurring after Bitcoin gained more than 25% from its recent lows.

That context matters.

The PCE report didn’t erase Bitcoin’s recent rally, but it did prevent BTC from establishing $80,000 as support.

The market is now watching whether Bitcoin can hold the upper-$70,000 range or whether Wednesday’s rejection above $80,000 triggers deeper profit-taking.

Fed Chair Kevin Warsh Is the Next Big Catalyst

Attention now turns to Federal Reserve Chair Kevin Warsh, who is scheduled to deliver his first Jackson Hole keynote as Fed chair on Friday, August 28. 

His comments could provide clues about whether the Fed views the latest inflation numbers as temporary or evidence that monetary policy needs to remain restrictive.

For crypto investors, the equation is relatively straightforward:

Persistent inflation → higher rates for longer → tighter liquidity → more pressure on risk assets.

Wednesday demonstrated how quickly that macroeconomic relationship can affect crypto.

Bitcoin finally reclaimed $80,000, only to lose it hours later when a single inflation report reminded markets that the Federal Reserve’s fight against rising prices isn’t finished.

BTC’s next test will be whether the latest decline is simply profit-taking after a massive rally — or the beginning of a larger correction after its $80,000 breakout failed to hold.