On the evening of August 14 (Beijing time), the crypto market experienced a rapid decline following the release of U.S. PPI data.

The data showed that the U.S. July PPI surged by 0.9% month-over-month, reaching a three-year high, with a year-over-year increase of 3.3%. Upon the news, the crypto market plummeted:

According to OKX market data, Bitcoin dropped from its previous high of around $124,500 to approximately $117,156 in the early hours of the 15th, while Ethereum fell from its peak of $4,790 to $4,451.

Earlier, Tuesday’s CPI data came in slightly below expectations, boosting market expectations that the Fed might cut rates in September—some even anticipated a 50bp reduction. However, after the unexpected PPI surge, the 50bp rate cut was largely priced out, and the probability of a 25bp cut, as indicated by the CME FedWatch Tool, dropped from near certainty to about 92.1%.

Following the short-term price drop, the crypto market recovered slightly during the day on August 15, but macroeconomic uncertainties remain.

Unexpected PPI Surge Lowers September Rate Cut Odds

The Producer Price Index (PPI) measures the average change in prices received by domestic producers for their goods and services. As an upstream indicator, it reflects inflationary pressures before the Consumer Price Index (CPI). If PPI continues to rise, increased production costs typically translate to higher consumer prices months later.

The latest PPI reading far exceeded expectations, with service-sector PPI rising 1.1% month-over-month—the largest increase since March 2022. Notably, wholesale margins for machinery and equipment jumped by 2%, a key driver of the PPI surge. Analysts noted that while businesses had previously absorbed most tariff costs, these expenses are now gradually being passed on to manufacturers and consumers, suggesting a moderate inflation rebound in the second half of the year.

“Although businesses have borne the brunt of rising tariff costs so far, higher import expenses are increasingly squeezing profit margins,” said Ben Ayers, senior economist at Nationwide, in a report. “We expect tariff costs to more significantly impact consumer prices in the coming months, with inflation likely to rise moderately in late 2025.” The report indicated that despite slowing demand in the first half of the year, businesses are adjusting pricing to offset tariff-related cost pressures.

The PPI spike suggests that previously suppressed inflationary forces are re-emerging, particularly in manufacturing and services, potentially foreshadowing a CPI rebound. While the earlier CPI dip had fueled optimism, the strong PPI rebound indicates persistent cost pressures at the production level. Before the PPI release, markets had nearly fully priced in a 25-50bp September rate cut. Post-data, the likelihood of a 25bp cut fell to around 92%, while a 50bp cut was almost entirely ruled out.

Crypto Market Recovers Short-Term, but Uncertainty Lingers

Despite the overnight dip on August 14, Bitcoin and Ethereum had partially recovered by August 15 (Beijing time). For bullish investors, the dip may have presented a buying opportunity.

However, the PPI surprise serves as a reminder that inflation isn’t fully under control, and rate cuts are not guaranteed.

Short-term recovery is likely driven by technical rebounds and bargain-hunting, but macroeconomic uncertainties persist. The Fed’s September policy decision will hinge on upcoming inflation, employment, and other key data. If inflation remains strong, the timing and magnitude of rate cuts may fall short of expectations, delaying improvements in market liquidity.

For crypto, macro liquidity and risk sentiment amplify price volatility. Under favorable expectations, core assets like Bitcoin and Ethereum may test key resistance levels. But if data continues to dampen easing hopes, the market could face renewed downward pressure.

Between now and the Fed’s September meeting, three key data categories will shape rate cut expectations:

1. Inflation metrics (CPI, PPI, and especially core PCE—the Fed’s preferred gauge).

2. Labor market data (nonfarm payrolls and jobless claims, reflecting economic resilience).

3. Activity and consumption signals (retail sales, ISM manufacturing/services PMI).

These reports will roll out from late August to mid-September, ahead of the Fed’s September 16-17 meeting.

Amid this backdrop, crypto and U.S. stocks will remain highly sensitive to macro data. Investors should stay nimble and avoid one-sided bets on policy direction.