Crypto Prices Climb on Softer PPI Data, but Bitcoin Rally Faces Headwinds

U.S. wholesale inflation cooled more than expected in August, fueling optimism for deeper Federal Reserve rate cuts and giving cryptocurrencies a short-term lift.

The Producer Price Index (PPI) fell 0.1% month-over-month versus forecasts for a 0.3% gain and July’s 0.9% rise. On a year-over-year basis, PPI slowed to 2.6%, well below expectations of 3.3% and down from 3.1% previously.

Core PPI, which strips out food and energy, also dipped 0.1% in August against an anticipated 0.3% increase. Year-over-year, core PPI grew just 2.8%, compared to 3.4% in July and estimates of 3.5%.

Crypto markets reacted quickly. Bitcoin (BTC) edged up more than 1% to $113,700, while ether (ETH) mirrored the move higher. Solana (SOL) extended its recent outperformance, rising 3.3% to $224.

The data followed July’s hotter-than-expected PPI reading, which stoked inflation concerns amid deteriorating labor conditions. Traders now turn to Thursday’s Consumer Price Index (CPI) release — a key input for the Fed’s policy meeting next week.

“That’s exactly the PPI data we should cheer for, assuming it helps suppress CPI inflation, end the re-inflation streak, and let the Fed focus on labor market weakness,” said Caleb Franzen, founder of Cubic Analytics, in an X post.

Fed Outlook and Bitcoin’s Puzzle

Markets broadly expect a 25 basis point rate cut next week, but odds of a larger 50-point cut have risen to 10%, up from 7% prior to the PPI release and 0% a week ago, according to CME FedWatch.

Easier policy typically boosts risk assets, yet bitcoin’s recent behavior has been less predictable. The cryptocurrency has rallied briefly on dovish news before pulling back, while gold has consistently marched to new highs on the same signals.

Despite the bullish setup for looser monetary conditions, analysts caution that crypto traders may need more conviction before bitcoin can break sustainably higher.