On the evening of August 26, the U.S. July PCE data was released—up 3.7% year over year, higher than the expected 3.6%, the 65th consecutive month above the Fed’s 2% target. Core PCE is up 3.3% year over year—still not coming down.
After the data was released, the probability of a September hike rose from 36% to 42%-44%. The dollar logged its biggest gain in nearly four weeks. All three major U.S. stock indexes plunged.
Just one day before the PCE was announced, BTC had touched $81,237—first time above $80,000 since May. In ten days, it rose from $62,800 to $78,900, up 25%, marking the best ten-day gain of 2026.
Then what? An inflation report wiped out about $2,000 of Bitcoin’s gains within a few hours.
Right now, BTC is struggling around $78,000.
Breaking down the data truth behind “ice and fire from both ends.”
🔥 The hot side (inflation end):
PCE year over year at 3.7%, the 65th consecutive month above 2%.
Core PCE year over year at 3.3%, still not budging.
Service prices excluding housing are rising even faster than in June.
🧊 The cold side (economic end):
Inflation-adjusted consumer spending—zero growth.
Personal consumption expenditures flat month over month
Actual income year over year rose only 0.2%, and before that, for several months it was negative.
Put it into plain language:
Five years of cumulative price hikes have already drained Americans’ purchasing power. You don’t have money, but prices keep rising.
(The New York Times) offered a very restrained take: “The stubborn U.S. inflation problem did not get worse in July, and it did not get better.”
But “not getting better” by itself is the worst news.
💊 This is what the crypto market fears most—an embryonic form of stagflation.
First, don’t spin me a line about “Bitcoin being an anti-inflation asset.”
In a stagflation environment, Bitcoin is neither gold nor tech stocks.
Why?
The Fed can’t cut rates—inflation is at 3.7%, far from its 2% target. At the July meeting, three officials already voted against holding rates steady and favored a hike. By year-end, one hike is fully priced in by traders.
The economy can’t support itself either—consumption is flat, and income barely rises. Q2 GDP at 1.5% looks okay on the surface, but underneath it all relies on imported AI chips. And the imports item alone was cut by 1.64 percentage points.
Bitcoin caught in the middle:
Tell the “anti-inflation” story? Rate-hike expectations are weighing on you.
Tell the “risk-on preference” story? The economy is cooling.
Tell the “digital gold” story? In the past two years it moved with the Nasdaq; the Nasdaq moved with liquidity.
If the Fed won’t cut rates and liquidity won’t loosen, Bitcoin is just a sandwich—inflation compresses valuation from the top, but the collapsing economy can’t hold it up from below.
This leg of Bitcoin’s move from $62,800 to $81,000 was powered by liquidity expectations driven by the Treasury’s expansion of debt buyback operations.
But the moment the inflation data came out, everyone’s attention immediately snapped back to whether the Fed will hike.
Your upside depends on someone else’s liquidity moves, but your pricing power is in the Fed’s hands.
This isn’t a bull market—it’s a party with borrowed liquidity.
Bitcoin is up 25% in ten days, but market sentiment actually turned negative on the day prices peaked. Even the people pumping are feeling uneasy.
🎯 Right now, everyone is waiting for one person—Kevin Warsh.
Friday, Federal Reserve Chair Wash will deliver his first major speech since taking office at Jackson Hole.
This is his first Jackson Hole appearance since taking office in May.
What does the market want? One answer:
Inflation is staying high—did one-off shocks like tariffs and the war cause it, or is it a sign of an overheating economy?
If it’s the former—then you can wait, no need to hike.
If it’s the latter—then September may really see a rate hike.
Bank of America warns: if Wash does not send a rate-hike signal, the yield on 30-year U.S. Treasuries could surge to 5.5%. And if he clearly signals readiness to restart rate hikes even if inflation doesn’t fall, the probability of a September hike would jump from around 40% today to a 50-50 call.
What he says will determine the trading main theme for the next quarter.
I know what you’re thinking.
“So what do we do—sell everything? Short it?”
Don’t rush to make any decisions.
Before Wash’s speech, two things happened at the same time:
NVIDIA earnings (after the bell on Wednesday)—this Bitcoin rally is highly correlated with AI stocks.
$6.4 billion in Bitcoin options expire on Friday, with the biggest pain point at $78,000.
These three catalysts stacked together—this might be the most critical forty-eight hours for the 2026 crypto market.
Someone said, “Inflation not getting worse is good news.”
Wrong. Inflation hasn’t worsened, but you don’t have money—that’s the real problem.
Consumption has stopped, but inflation hasn’t fallen.
This is what the Fed fears most—and what we should fear most too.
Friday, how would Bosh explain this paradox?