Here’s why Warsh’s Jackson Hole address is a pivotal moment for bitcoin and gold
Warsh’s Jackson Hole address may shape expectations around Fed backing for Treasury repurchases, with knock-on effects for bitcoin, gold, and long-dated yields.
— Warsh’s debut Jackson Hole keynote will probe whether the Fed might back Treasury’s expanded bond-repurchase initiative and help keep long-dated yields in check.
— Bitcoin climbed from $64,000 to $80,000 and gold pushed higher following Treasury’s announcement, as markets began pricing in the prospect of eventual Fed-supported yield-curve control.
— Any hint of Fed–Treasury coordination could prolong the bitcoin and gold rally, whereas a defense of Fed independence could lift yields and the dollar, weighing on both assets.
Federal Reserve Chair Kevin Warsh is set to deliver his first Jackson Hole keynote on Friday at 10 a.m. ET. It marks his first major set-piece address since taking office in May, and one that has stirred considerable anticipation in the crypto community.
«At 10:00 AM ET, Kevin Warsh delivers his first-ever Jackson Hole speech. Major volatility ahead,» one popular crypto-focused X account posted early Monday.
That framing is fair given what hangs in the balance: whether the Fed will be prepared, if needed, to back the U.S. Treasury’s $4 billion bond-buyback scheme to help rein in longer-dated Treasury yields, the benchmark for borrowing costs throughout the economy.
On Aug. 19, Treasury Secretary Scott Bessent stated the government would at least double its buybacks of longer-dated Treasury notes, lifting each operation from $2 billion to at least $4 billion beginning Sept. 9 through Nov. 4. The announcement came as the 30-year yield hovered at its highest level since 2007 and posed a challenge to both fiscal management and valuations of risk assets.
As such, markets read it as a sign of an official bid to cap long-term borrowing costs – one that may eventually see the Fed step in and purchase as many bonds as required to keep yields down, a form of yield-curve control.
Hard assets that benefit from financial repression and a deluge of fiat liquidity quickly rallied. Bitcoin and gold surged, with bitcoin rising from $64,000 to $80,000 in a week. Treasury’s program is not QE, meaning it does not add fresh liquidity to markets, and the size is small compared with the $40 trillion federal debt. So unless the Fed joins in, buying bonds itself and injecting liquidity, a sustained decline in yields looks unlikely.
«The market senses a slippery slope towards fiscal dominance and a possible loss in Fed independence. The assumption here is that for the Treasury to be successful in keeping yields down, it will need to significantly increase the size of the buybacks. That might require the Fed to become complicit in this operation twist, which takes us down the debasement path,» Jurrien Timmer, Fidelity’s director of global macro, said.
That assumption is what Warsh’s speech will test.
If Friday’s speech is a general high-altitude talk or undercuts that assumption, the bullish momentum in bitcoin and gold could weaken. Language that casts the buybacks as routine liquidity work, stresses monetary policy independence, and rules out Fed participation would could push Treasury yields and the dollar higher and bitcoin and gold lower.
By contrast, words that signal implicit acquiescence to the Treasury or that leave room for potential coordination between the Treasury and the Fed would likely validate expectations of a full-blown Fed intervention, adding to the bullish momentum in bitcoin and gold.
In essence, the speech doesn’t need to signal where interest rates are likely to be to move these two assets. It only needs to answer whether the Fed will stand behind Treasury’s attempt to manage the longer duration yields, or stand apart from it. Which side Warsh leans toward remains to be seen.
The Friday morning speech is also seen as an opportunity for Warsh to lay out the interest rate path, share inflation outlook, and communicate a change of bias or an important operational or policy announcement.
Observers, however, are unsure whether anything concrete will be said.
Warsh has so far preferred little verbal intervention and almost no forward guidance, leaving markets to set prices on their own. On that record, the odds of an outright endorsement of Treasury’s buyback program or interest rate guidance look slim.
«We don’t expect this to be one of those times, given Warsh’s reticence when it comes to forward guidance. We think that while the audience and the market would like something concrete to take away from his appearance, Warsh will more likely speak generally about his ambitious reform agenda, and the reason why each task force (Inflation Frameworks, Data, Communications, Balance Sheet Policy, and Productivity and Jobs) is crucial,» analysts at BNY said.
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