Key Takeaways
Bitcoin (BTC) surged above $114,000, its highest since Aug. 24.
US Producer Price Index (PPI) inflation cooled sharply in August, coming in well below forecasts.
Traders now see a September Fed rate cut as increasingly likely.
Historical onchain data shows Bitcoin tends to face short-term turbulence after Fed cuts, followed by longer-term upside.
Bitcoin Surges on Softer Inflation Data
Bitcoin rose to $113,884, briefly breaking above $114,000, after US inflation data signaled a cooling trend.
The August PPI fell to 2.6% year-over-year, below the 3.3% forecast, while Core PPI (excluding food and energy) dropped to 2.8%, far below the 3.5% consensus. On a monthly basis, PPI even turned negative, marking only the second contraction since March 2024.
Adding to the dovish outlook, July PPI figures were revised downward. Combined with this week’s historic US jobs revision, which erased 911,000 positions from the past 12 months, markets are pricing in a high probability of Fed rate cuts in September.
Analyst Views: CPI Still a Risk
Market analyst Skew noted that producer inflation trends usually lag CPI by one to three months, meaning sticky consumer inflation readings may still surface in the near term.
Still, the broader trend points to cooling inflation into Q4 2025, giving the Fed more room to ease policy.
Onchain Data: What Happens When the Fed Cuts
Bitcoin’s historical reaction to Fed rate cuts suggests short-term turbulence before longer-term rallies:
MVRV (Market Value to Realized Value): Often falls near 1 during panic sell-offs, signaling undervaluation.
Whale Ratio: Spikes as large holders sell during uncertainty, before accumulation resumes.
Examples:
March 2020: Panic around emergency rate cuts drove MVRV to 1 and whale selling surged, but liquidity later fueled Bitcoin’s 2020–2021 bull run.
Late 2024 easing cycle: Similar short-term selling before stabilization and a renewed rally.
If history repeats, the 2025 easing cycle could deliver initial volatility but set the stage for higher BTC prices.
Market Outlook
With Bitcoin reclaiming $114K and Fed cuts increasingly priced in, traders are eyeing the $115K psychological resistance as the next test. A confirmed breakout could set the tone for a stronger Q4 rally, supported by renewed liquidity inflows, according to Cointelegraph.
