Warsh Whispers "Inflation's Cool," Bitcoin Sprints Past $60K Like It Heard the Safe Word

Bitcoin ($BTC) reclaimed $60,000 on Wednesday and pushed toward $62,000 on Thursday after Federal Reserve Chair Kevin Warsh told the European Central Bank's annual forum in Sintra, Portugal, that "inflation risks have come down." Warsh, appearing on a panel alongside ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem, declined to give guidance on the Fed's next interest-rate decision, saying policymakers would debate incoming data at their meeting in four weeks. He reaffirmed the central bank's commitment to its 2% inflation target. "If there were people in households or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they'd be disappointed," Warsh said. "We're going to deliver price stability in the U.S." The panel broadly agreed that central banks should move away from explicit forward guidance. Lagarde said she regretted feeling "bound and compelled" by forward guidance and instead favors "framework guidance," in which the ECB explains how it reaches policy decisions without signaling a predetermined path for interest rates. Warsh echoed that view, saying the Fed's priority is to "get policy right" and that policymakers should discard communication tools if they make it harder to reach the best decisions.

On artificial intelligence, Warsh called it a driver of productivity while leaving its inflation impact open. "I'm not going to make a judgment now," he said when asked whether AI spending is inflationary, according to a post on X by Nick Timiraos of The Wall Street Journal. He described the AI boom as a surge in capital expenditures currently showing up on the demand side that he expects will eventually expand the economy's supply side, with "huge implications for monetary policy" if it does. Cleveland Federal Reserve President Beth Hammack recently tied AI demand to the case for hikes, saying "these hyperscalers, will pay almost any price for those inputs, and they need things built yesterday."

Market reaction was swift. Bitcoin traded near $60,088 on Wednesday, up about 2.8% in 24 hours, with Ethereum ($ETH) rising about 3.3% to near $1,619, lifting Bitcoin's market value above $1.2 trillion, according to TradingView. Gold rebounded to an intra-day high of $4,115, with silver and other precious metals also gaining. By Thursday, Bitcoin climbed above $61,000, up about 4.1% over 24 hours per CoinDesk data, its strongest level in over a week. The move held even as South Korea's Kospi index fell 7.9% after Samsung Electronics and SK Hynix shed a combined $290 billion in market value on renewed AI-chip worries, according to Bloomberg, and Meta outlined plans to sell spare computing power to outside customers.

The rebound followed a bruising month. Bitcoin had slid to its 2026 low near $58,000 last week, after U.S. consumer prices rose 4.2% year-on-year in May, the fastest since 2023, prompting $1.26 billion in liquidations. The Fed held rates at 3.5% to 3.75% in June and signaled a possible hike. Those fears eased after oil prices retreated in late June and Warsh struck a softer tone than his hawkish June debut. Thursday's U.S. jobs report added fuel: nonfarm payrolls rose by just 57,000 in June versus the 115,000 consensus, with April and May payrolls revised down by a combined 74,000, the unemployment rate at 4.2% and average hourly earnings up 0.35% to $37.64. Roughly $450 million in crypto short positions were liquidated within 24 hours, per CoinGlass data, and Bitcoin later traded near $61,465, up 1.18% over 24 hours, according to BeInCrypto. Bitcoin remains 51% below its October 2025 record of $126,080 and down 44% over the past year.

Institutional demand has not yet confirmed the bounce. Spot Bitcoin ETFs posted $294 million in net outflows on Wednesday, extending June's record $4.5 billion exit, the products' worst month on record, per SoSoValue. CoinMarketCap's Fear and Greed Index improved from Extreme Fear to Fear. Tiger Research said it has turned more constructive, arguing the market is likely in the final stage of its bear cycle. CryptoQuant, however, flagged fresh exchange-deposit warning signs, with BTC inflows jumping above 50,000 per day, ETH inflows above 1.25 million and altcoin deposits hitting a two-month high. Friday's U.S. jobs report now sets the tone for July, with a strong payrolls print potentially keeping the Fed restrictive and a soft one reviving bets on rate cuts.