tl;dr
Bitcoin and other cryptocurrencies fell on Thursday after hotter-than-expected producer price index data reduced hopes for imminent Federal Reserve rate cuts. Bitcoin dropped 2.9% to around $118,000, Ethereum fell 2.9% to $4,560, and other tokens like Solana and XRP also declined. The PPI rose 0.9% ...
Bitcoin and other cryptocurrencies experienced a downturn on Thursday following the release of hotter-than-expected producer price data, which dampened hopes for imminent Federal Reserve rate cuts. Bitcoin traded around $118,000, marking a 2.9% decline over the previous day, while Ethereum also decreased by 2.9% to $4,560. Other digital assets like Solana and XRP saw declines of 2.4% and 5.7%, respectively.
The drop came after Bitcoin hit a record high above $124,000 on Wednesday, with Ethereum similarly approaching new peak levels. The producer price index (PPI), which measures wholesale price changes across goods and services, rose 0.9% in July—significantly above the 0.2% forecast—representing the sharpest monthly increase since May 2022. This spike, particularly in the trade component of the index, signals inflationary pressure that troubles Federal Reserve policymakers.
Market participants had pinned their hopes on a potential rate cut by the Fed in September, as shifting labor market data and economic indicators suggested some economic fragility. However, Thursday’s data tempered expectations, with the probability of a quarter-point cut falling slightly from 94.3% to 92.8%, according to CME FedWatch. More aggressive cuts once envisioned—such as a 50-basis-point reduction—are now off the table, with those odds dropping to zero.
Adding to market sentiment, U.S. Treasury Secretary Scott Bessent clarified that the government does not plan to purchase Bitcoin to augment its strategic reserve. Instead, the government will rely solely on existing confiscated Bitcoin holdings, ceasing sales and building that stockpile without further acquisitions. This announcement removed prior speculation that the government might increase its Bitcoin treasury holdings in a budget-neutral manner, a factor that earlier contributed to Bitcoin’s recent price surge.
Overall, Thursday’s data and statements sparked a retreat in crypto markets, illustrating the complex interplay between macroeconomic signals, central bank policy expectations, and governmental actions regarding Bitcoin. Investors are left weighing these dynamics as they navigate a volatile landscape where price highs can quickly give way to sudden pullbacks.