Bitcoin’s macro battle intensified Thursday after new U.S. inflation data reinforced expectations that the Federal Reserve could raise interest rates next week.
The U.S. Bureau of Labor Statistics reported that the Producer Price Index for final demand increased 0.4% in August, following a 0.1% increase in July. Producer prices were 5.4% higher than a year earlier.
Energy was the major pressure point. Final-demand energy prices increased 4.2% during August, while diesel surged 24.1%. Goods prices overall climbed 1.1%, while services increased a much smaller 0.1%, according to the BLS Producer Price Index report.
The monthly headline number matched consensus forecasts, while the 5.4% annual increase showed that producer inflation remained elevated. Reuters reported that market expectations for a 25-basis-point Federal Reserve rate increase climbed following the data. Traders later placed the probability of a hike at about 70%, according to Reuters.
Bitcoin reacted sharply. Bitstamp data cited by Bitcoin.com showed BTC falling to approximately $76,651, with crypto derivatives liquidations reaching roughly $562 million during the broader selloff.
The decline pushed Bitcoin well below the $80,000 level that had been the major tactical battleground throughout the week. Before the PPI release, Bitcoin had been consolidating around the upper-$78,000 to $79,000 range before the inflation report triggered another wave of selling and leveraged liquidations.
Friday’s Consumer Price Index is now the final major inflation report before the September 15-16 Federal Reserve meeting. The outcome could materially influence whether policymakers resume monetary tightening or hold rates steady.
TOKEN RECON ASSESSMENT
The battlefield has shifted lower.
Bitcoin is no longer trying to prove it can hold $80,000. It is trying to prove that $76,000-$77,000 can contain the macro-driven liquidation.
Thursday’s selloff was primarily a rates-and-inflation event rather than a crypto-specific failure.
A cooler CPI Friday could rapidly reverse part of the move. A hot CPI combined with oil above $100 and a 70%-plus probability of a Fed hike would keep pressure on Bitcoin and leveraged crypto positions.
Watch $76,000, liquidation activity, Treasury yields, ETF flows and Friday’s CPI.
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