tl;dr
Bitcoin fell below $117,000 after briefly surpassing $124,000 due to stronger-than-expected inflation data that dampened hopes for aggressive Federal Reserve rate cuts, with market projections now expecting only two cuts in 2024 instead of three. July inflation reports showed rapid increases in core...
Bitcoin experienced a sharp decline, falling below $117,000 after briefly surpassing an all-time high of $124,000. This price movement was largely influenced by stronger-than-expected inflation data that reduced hopes for aggressive Federal Reserve rate cuts. Market projections now anticipate only two rate cuts this year instead of three, reflecting a more cautious outlook on monetary easing.
Last week’s inflation reports revealed troubling signs beneath the surface. While the July Consumer Price Index (CPI) headline appeared favorable at first glance, core and “Supercore” CPI—measures excluding food, energy, and housing—showed rapid increases, especially in the service sector. More startling was the July Producer Price Index (PPI), which surged by 0.9% month-over-month, marking the largest spike in three years. Economists see this as a delayed effect of US tariffs now impacting wholesale prices, with businesses passing higher costs downstream.
The July Import Price Index also signaled rising consumer costs linked to tariffs, undermining previous beliefs that trade policies had minimized inflation pressures. With import prices climbing, the Federal Reserve faces increased difficulty justifying further rate cuts, making monetary policy tightening a more likely path.
This evolving macroeconomic context caused Bitcoin’s price to vacillate dramatically. Initially buoyed by Treasury Secretary Scott Bessent’s optimistic comments about a potential 50-basis-point rate cut, the PPI release quickly reversed market enthusiasm. Bessent subsequently moderated his stance to a 25-basis-point cut, and investor expectations recalibrated accordingly. Data from the CME FedWatch Tool now shows only two anticipated rate cuts for 2024. Moreover, Bitcoin deposits surged on major exchanges like Binance, a typical precursor to selling activity, while Bitcoin and Ethereum ETFs saw net outflows after steady inflows earlier in the week.
Ethereum, the world’s second-largest cryptocurrency, also showed volatility. Despite briefly reaching a new high on Monday, it failed to break its all-time USD peak of $4,860 throughout the week and traded near $4,460 at Monday’s open.
Looking ahead, all eyes will be on the upcoming Federal Reserve Jackson Hole Economic Symposium from August 21 to 23. Fed Chair Jerome Powell is expected to provide crucial insights on US monetary policy during his speech early on Friday, which could heavily influence market sentiment. Alongside Powell, Vice Chair Michelle Bowman and Governor Christopher Waller—both usually more dovish voices—will speak as well, potentially signaling shifts in rate cut expectations. The release of the July FOMC meeting minutes on Wednesday will also be pivotal in shaping market views.
As uncertainty over Federal Reserve policy grows amid mixed economic signals, Bitcoin and broader cryptocurrency markets may experience heightened volatility. Investors should closely monitor policy clues and inflation trends to navigate these choppy waters successfully.