Bitcoin and Ether Retreat as U.S. Inflation Pressures Weigh on Markets

Bitcoin and ether slid to fresh lows on Sunday, pressured by lingering concerns over U.S. economic data that came in hotter than expected last week.

Bitcoin dipped around 2% in the past day to trade near $115,500, after briefly touching $115,046 earlier in the session. The leading cryptocurrency is now down 7.5% from its midweek record high of roughly $124,350. Ether followed a similar trend, dropping 3.3% to about $4,329.

The decline comes as investor optimism for interest rate cuts faded. After July’s consumer price index gave markets a boost, producer price index data surprised to the upside with a 3.3% annual increase, tempering expectations for monetary easing in September. Stronger inflation data has fueled a firmer U.S. dollar and increased risk aversion across markets.

Confidence was further undermined after the U.S. Treasury Secretary confirmed that the government would not purchase bitcoin for its strategic reserve, instead pursuing alternative “budget-neutral” strategies.

Despite the sell-off, spot exchange-traded funds continued to see notable reshuffling. Flows left certain funds such as those tied to Grayscale and Ark Invest, while BlackRock’s IBIT ETF attracted steady inflows. A similar pattern emerged in ether ETFs, signaling that investors may be consolidating into lower-cost products rather than pulling out of crypto altogether.

Market participants now view $115,000 and $112,500 as crucial support levels for bitcoin. A break below those thresholds could open the door to a move toward $110,000.

Looking ahead, traders are focused on two major macro catalysts: the Federal Reserve’s Jackson Hole Symposium this week, where policy signals could revive risk appetite, and the initial jobless claims data due on August 21, which may further guide crypto’s next leg.