Bitcoin experienced a sharp decline in mid-August 2025 after reaching a historic peak of over $124,000, dropping more than 4% to settle around $118,000. This decline was a direct result of the release of U.S. inflation data (Producer Price Index PPI) that significantly exceeded expectations, with the index recording a 0.9% increase in July, the highest in over two years, compared to expectations of only 0.2%.
These figures raised concerns among investors that the U.S. Federal Reserve would not resort to a significant interest rate cut in September as expected, but would limit cuts or postpone them, leading to a strengthening of the U.S. dollar and a withdrawal of liquidity from high-risk assets, including cryptocurrencies. This was reflected in Bitcoin:
Risk appetite increased and the currency rose to historic levels at the beginning of the week after weaker-than-expected Consumer Price Index (CPI) data.
The trend shifted to a sharp decline after the Producer Price Index (PPI) data increased pessimism about the future of interest rate cuts.
Large centers with leveraged positions worth over a billion dollars have been liquidated, which has doubled the rapid decline in cryptocurrency prices.
In summary: Strong U.S. inflation data places immediate downward pressure on Bitcoin, by reducing expectations for interest rate cuts and increasing the strength of the dollar, while any data indicating a rapid and large interest rate cut supports Bitcoin and raises liquidity towards cryptocurrency markets.
