Bitcoin, Ethereum Fall as PPI Shock Squashes Hopes for Jumbo Rate Cut

Bitcoin and other cryptocurrencies slipped on Thursday after rising producer prices blunted rate-cut hopes, and U.S. Treasury Secretary Scott Bessent said the government wouldn’t start cutting checks to flesh out its strategic Bitcoin reserve.

Bitcoin changed hands around $118,000 on Thursday, a 2.9% decrease over the past day, according to crypto data provider CoinGecko. Ethereum also fell 2.9% to $4,560, while Solana and XRP dropped 2.4% to $194 and 5.7% to $3.07, respectively.

The PPI report snapped a strong trading week for Bitcoin, with the asset’s price setting a new all-time high above $124,000 on Wednesday, while Ethereum surged toward record levels.

The Producer Price Index (PPI), which tracks price changes across a broad range of goods and services for producers, jumped 0.9% in July, the U.S. Bureau of Labor Statistics said on Thursday. Economists expected the index to rise 0.2% on a monthly basis.

Representing the largest monthly increase since May 2022, Thursday’s hotter-than-expected PPI reading showed an increase in the index’s trade component, a worrying sign for the Federal Reserve, according to Liz Thomas, head of investment strategy at personal finance firm SoFi.

“The Fed will not like this report,” she said on X.

The central bank has held interest rates steady so far this year, fearing that U.S. President Donald Trump’s tariffs could make it harder to achieve its 2% inflation goal. As some officials have pointed to signs of fragility in the labor market recently, however, traders have grown increasingly confident that the Fed will cut rates at the conclusion of its September meeting.

Traders took a slight step back on Thursday, penciling in a 92.8% chance of a quarter-percentage-point rate cut at the conclusion of the Fed’s next meeting compared to a 94.3% a day before, according to CME FedWatch.

Citing large downward revisions for employment figures for May and June, Bessent advocated for a 50-basis-point rate cut on Tuesday. The odds of a jumbo-sized rate cut in September evaporated on Thursday, falling to 0.0% from 5.7% a day before.

Although Bessent’s comments may have worked in Bitcoin’s favor earlier this week, with risk assets like stocks and crypto historically benefiting from lower interest rates, his latest comments appeared to dampen enthusiasm towards the coin on Thursday.

The official said that the government is “not going to be buying” Bitcoin to supplement its existing holdings of confiscated assets. Previously, the White House had teased purchasing Bitcoin to add to the nation’s stockpile in a budget-neutral way.

“We are going to use confiscated assets and continue to build that up,” Bessent said of the Bitcoin reserve. “We’re going to stop selling that.”