Bitcoin Tanks 2% After Hot PPI Inflation Data — Is the Rally Over?
A hotter-than-expected Producer Price Index (PPI) report for July has reignited inflation concerns in the United States and rattled both traditional and crypto markets.
The Bureau of Labor Statistics (BLS) said Thursday that wholesale prices surged 0.9% month-over-month, far above the 0.2% forecast and the biggest jump since June 2022.
The PPI, which tracks the prices producers receive for final demand goods and services, also showed core PPI (excluding food and energy) jumping 0.9% — triple the expected 0.3%. Stripping out food, energy, and trade services, prices rose 0.6%, marking the steepest increase since March 2022. On a yearly basis, headline PPI rose 3.3%, the largest 12-month gain since February and well above the Federal Reserve’s 2% inflation target.
Services Inflation Leads the Charge
Services prices drove the spike, climbing 1.1%, the largest gain since March 2022.
Trade services margins jumped 2%, with a 3.8% rise in machinery and equipment wholesaling accounting for nearly a third of the increase.
Portfolio management fees surged 5.4%, while airline passenger services prices rose 1%. The surge comes amid ongoing developments in President Donald Trump’s tariff implementations, which have been reshaping cost structures across industries.
Immediate Market Reaction — Stocks, Bonds, and Crypto
The hotter PPI inflation print sent shockwaves through financial markets. U.S. stock futures turned lower, shorter-term Treasury yields climbed, and the cryptocurrency sector took a sharp hit.
Drop in crypto prices (Source: Crypto Bubbles)
The global crypto market cap fell over 2% within hours of the report, with Bitcoin (BTC) dropping more than 2% and Ethereum (ETH) sliding over 1%.
The swift downturn reflected traders’ concerns that persistently high wholesale inflation could force the Federal Reserve to delay or soften anticipated rate cuts, dampening risk asset sentiment.
“The fact that PPI was stronger-than-expected and CPI has been relatively soft suggests that businesses are eating much of the tariff costs instead of passing them onto the consumer,” said Clark Geranen, chief market strategist at CalBay Investments.
“Businesses may soon start to reverse course and start passing these costs to consumers.”
Chris Zaccarelli, chief investment officer at Northlight Asset Management, added: “The large spike in the Producer Price Index this morning shows inflation is coursing through the economy, even if it hasn’t been felt by consumers yet. This is a most unwelcome surprise and is likely to unwind some of the optimism of a ‘guaranteed’ rate cut next month.”
Fed Cut Odds Shift Slightly
Earlier this week, CPI data came in near expectations, leading traders to largely price in a September Fed rate cut.
Fed rate cut odds (CME FedWatch)
Following the PPI release, CME FedWatch data showed those odds slipping, though not dramatically.
Data Reliability Under Scrutiny
The release also comes amid growing questions over BLS data accuracy.
President Trump recently removed the bureau’s commissioner and plans to nominate Heritage Foundation economist E.J. Antoni, a vocal critic, as the next head. The BLS has been hampered by budget cuts and layoffs, with July’s PPI being the first since the agency cut 350 cost categories from its dataset.
