Key Takeaways
August Producer Price Index (PPI) came in softer than expected, falling 0.1% MoM versus a forecasted +0.3%.
Bitcoin (BTC) climbed above $113,700, while Ether (ETH) and Solana (SOL) posted gains.
Traders increased bets on a 50 bps Fed rate cut next week, but BTC’s muted reaction signals lingering caution.
Crypto Markets React to Cooling U.S. Inflation
Crypto prices gained early Wednesday after U.S. wholesale inflation data showed signs of cooling. The August PPI fell 0.1% month-over-month, sharply below estimates of +0.3% and July’s +0.9% increase. Year-over-year, PPI slowed to 2.6%, down from 3.1% and well below expectations of 3.3%.
Core PPI, excluding food and energy, also fell 0.1% in August, against forecasts of +0.3%. Year-over-year, it rose 2.8%, under both July’s 3.4% and analyst expectations of 3.5%.
Crypto Price Action
Bitcoin (BTC): $114,120 (+1.1%)
Ethereum (ETH): modest gains, tracking BTC
Solana (SOL): $224 (+3.3%), continuing recent outperformance
BTC’s breakout above $113K signals some renewed momentum, but traders remain cautious after recent failed rallies.
Market Caution Despite Fed Optimism
Soft inflation data reinforces expectations that the Federal Reserve could begin cutting rates in September. While markets overwhelmingly expect a 25 bps cut, CME FedWatch data shows odds of a 50 bps move rose to 10% after the PPI release, up from 0% one week ago.
Still, analysts warn Bitcoin’s muted follow-through compared to gold’s record-setting gains highlights fragile market sentiment.
“Assuming this suppresses CPI inflation, it should allow the Fed to focus explicitly on labor market weakness,” said Caleb Franzen, founder of Cubic Analytics.
Looking Ahead: CPI Data Next
The next key catalyst will be Thursday’s Consumer Price Index (CPI) report, which could cement expectations for the Fed’s September policy decision. A softer print may fuel further upside in risk assets, while a sticky reading risks undoing today’s gains.
