U.S. PPI Surge Triggers Bitcoin Selloff Below $120,000

• U.S. PPI data jumped to 3.3% yearly and 0.9% monthly, beating expectations and sparking inflation concerns.

• Bitcoin crashed below $120,000 as the hot inflation data reduced the chances of September Fed rate cuts.

• Higher producer prices may force the Federal Reserve to keep interest rates elevated longer than expected.

Bitcoin experienced a sharp decline after releasing unexpectedly high U.S. Producer Price Index data. The cryptocurrency fell below the crucial $120,000 level as inflation concerns dampened investor sentiment across risk assets.

The U.S. Bureau of Labor Statistics reported PPI growth of 3.3% year-over-year in July, significantly exceeding analyst expectations of 2.5%. The monthly increase reached 0.9%, marking the largest single-month gain since June 2022. Core PPI, which excludes volatile food and energy prices, also surprised to the upside with a 0.9% monthly increase and 3.7% annual growth, well above forecasts of 0.2% and 2.9% respectively.

Bitcoin Price Reaction Reflects Inflation Fears

TradingView data shows that Bitcoin had maintained below $120,000 before the PPI release. Many market participants anticipated the inflation gauge would mirror recent Consumer Price Index trends, which showed steady price pressures at 2.7%. The CPI reading had previously boosted expectations for Federal Reserve rate cuts, with markets pricing in a 99% probability of a 25 basis point reduction in September.

The hotter-than-expected PPI data have altered this outlook dramatically. Bitcoin’s swift decline below $120,000 demonstrates how sensitive cryptocurrency markets remain to U.S. monetary policy signals. Risk assets typically struggle when central bank easing expectations diminish, as investors rotate toward safer government bonds and established currencies.

Federal Reserve Policy Outlook Shifts

The elevated PPI reading complicates the Federal Reserve’s monetary policy calculations. Officials had signaled potential rate cuts based on cooling inflation trends observed in recent months. However, producer prices often serve as leading indicators for consumer inflation, suggesting price pressures may resurge.

Higher production costs typically translate into increased consumer prices with a lag. This relationship explains why bond yields rose and equity markets declined alongside Bitcoin following the data release. The cryptocurrency market’s correlation with traditional risk assets has strengthened considerably, making it vulnerable to shifts in monetary policy expectations.

Fed policymakers face a more complex environment preparing for the September meeting. Persistent inflation could force the central bank to maintain current interest rate levels longer than anticipated. Such a scenario would likely pressure Bitcoin and other cryptocurrencies, which benefit from lower interest rates that reduce the opportunity cost of holding non-yielding assets.

The producer price surge highlights ongoing challenges in achieving the Fed’s 2% inflation target. Manufacturing and service sector costs continue climbing, potentially undermining progress made earlier this year. Traders will closely monitor upcoming economic releases to confirm whether this represents a temporary spike or renewed inflationary momentum.