Bitcoin trades more like gold than Nasdaq as Fed hawkishness hits both

Bitcoin and gold gave back much of last week's gains after Federal Reserve Chairman Kevin Warsh's Jackson Hole speech. Bitcoin traded near $77,411, almost 5% below last week's high. Gold traded around $4,432 an ounce, down 5.6% from Tuesday's peak. The two assets had risen together through August during what the article describes as a debasement trade. The US Treasury said it would double its buyback cap for longer-dated debt to at least $4 billion. The MSCI global gold miners index gained 43% in August, its strongest month on record. Gold and Bitcoin exchange-traded funds attracted $7 billion across five trading days, a record for that period. Gold reached an intraday high of $4,697 an ounce on Tuesday. Bitcoin reached $81,354 on Binance last week, its highest level in about three months. Warsh used his first Jackson Hole speech to emphasize inflation and give a more hawkish reading of the economy. Warsh said inflation was above the Fed's 2 percent target and that prices should be the Fed's predominant focus. CME FedWatch data put the probability of a September 16 move to a 3.75%-4.00% target range at 62.6%. The probability was 57% a day earlier and 39.9% a week earlier. Higher policy rates raise the opportunity cost of holding assets that generate no yield. Gold and Bitcoin both generate no yield, and both declined after the speech. Grayscale research found that Bitcoin's 90-day correlation with gold rose above 50% this year. Bitcoin's correlation with the Nasdaq 100 fell from over 60% to roughly 33%. Zach Pandl, Grayscale's Head of Research, said investors were treating Bitcoin as a monetary hedge rather than as a leveraged bet on technology stocks. The article says this positioning can support Bitcoin during debasement fears and pressure it when the Fed turns hawkish, regardless of technology-stock performance. The article also says some of the retreat may reflect profit-taking after a steep run. Both assets remained far above their levels at the start of the month. The September 16 meeting is presented as a test for the debasement trade.