PPI Spike and U.S. Treasury Bitcoin Reserve Stance Knock BTC Below $118K

Bitcoin’s momentum hit a speed bump Thursday as inflation data and government policy signals rattled traders. The flagship cryptocurrency slipped 2.9% to around $118,000, while Ethereum mirrored the decline at $4,560. Solana dipped 2.4% to $194, and XRP tumbled 5.7% to $3.07.

The pullback came just a day after Bitcoin’s new all-time high above $124,000 and Ethereum’s charge toward record territory. Fresh data from the U.S. Bureau of Labor Statistics revealed that the Producer Price Index (PPI) surged 0.9% in July—its sharpest monthly gain since May 2022—far above the 0.2% economists had forecast. The spike, driven largely by trade-related components, raised fresh concerns for the Federal Reserve’s inflation fight.

While the central bank has kept interest rates steady this year amid concerns over President Donald Trump’s tariff policies, traders had been increasingly confident of a rate cut at the Fed’s September meeting. Thursday’s PPI surprise tempered those expectations, with CME FedWatch showing the probability of a quarter-point cut slipping from 94.3% to 92.8% in a single day. Odds for a larger 50-basis-point cut evaporated entirely.

Adding to the market chill, U.S. Treasury Secretary Scott Bessent confirmed the government won’t initiate fresh Bitcoin purchases to build its strategic reserve. The reserve will instead rely solely on confiscated assets, halting previous sales but ruling out budget-neutral acquisitions teased earlier this year.

“We’re not going to be buying Bitcoin,” Bessent stated. “We’ll continue to grow our holdings through confiscations and stop selling them.”

Earlier in the week, Bessent’s push for a larger rate cut had buoyed risk assets like crypto. But Thursday’s inflation shock and the shelving of new Bitcoin buys left markets recalibrating—snapping what had been a stellar run for the digital asset space.