Crypto reacts to PPI shock

The latest producer price index data cooled bets on a jumbo rate cut and influenced crypto markets amid policy discussions.

Bitcoin and Ether Fall After PPI Shock Dampens Rate Cut Hopes

Bitcoin traded around 118000 dollars on Thursday, down about 3 percent, as the hotter than expected PPI report cooled appetite for a large rate cut. Ethereum fell to about 4560 dollars, with Solana and XRP also lower. The moves came after producers pushed prices higher, erasing gains from a week that had seen crypto assets touch fresh highs.

July PPI rose 0.9 percent, the largest monthly gain since May 2022, driven by a higher trade component. That outcome tempered bets on a 50 basis point cut and pushed traders to trim near term expectations. CME FedWatch put the chance of a rate cut at the next meeting at 92.8 percent, down from 94.3 percent a day earlier. Earlier this week, Scott Bessent urged a 50 basis point cut, but he also noted limits on new spending and the government’s approach to Bitcoin policy, saying officials would not start buying more Bitcoin to fill a reserve. He added that confiscated assets would be used to build holdings and that selling would stop.

The PPI surprise shows inflation signals can shift policy bets quickly and ripple through risky markets like crypto. Even as assets rebounded recently, a single data point can recalibrate expectations for rate paths and investor risk appetite. The underlying tension is political as well as economic: policymakers weigh budget constraints, legal questions, and the optics of crypto policy in a high interest rate environment. The prospect of a Bitcoin reserve funded by confiscated assets highlights how quickly policy ideas cross from budgetary talk to market impact.

Highlights

Policy choices will keep crypto markets in a delicate balance.