Bitcoin Rallies as PPI Cools to 2.6% — Fed Pivot Incoming?
Bitcoin (BTC) soared past $114,000 on Friday, riding a wave of bullish momentum as U.S. inflation data underwhelmed expectations. The Producer Price Index (PPI) dropped to 2.6% year-over-year in August, significantly below the projected 3.3%. Even Core PPI, which excludes food and energy, fell to 2.8%, down from a consensus of 3.5%.
“Markets are now pricing in a strong chance of a Fed rate cut in September,” noted analysts from the Kobeissi Letter.
Monthly PPI even turned negative, contracting for the second time since March 2024, adding fuel to the dovish fire. And inflation figures from July were also revised downward, further cementing the pivot narrative.
Traders Expect the Fed to Blink
With labor market data already showing massive revisions (911,000 jobs erased from past 12 months), the Fed has ample reason to shift gears.
- CME FedWatch Tool shows high probability of a rate cut at the Sept. 17 FOMC meeting
- Treasury yields dipped, and gold ticked up, reflecting risk-on sentiment
- BTC/USD jumped over $3,000 within hours of the PPI release
This move signals strong risk appetite returning to crypto markets.
Historical Patterns Suggest Short-Term Pain, Long-Term Gain
According to CryptoQuant, Bitcoin often reacts with initial volatility during easing cycles but rebounds strongly afterward. Two on-chain metrics support this thesis:
🧠 MVRV (Market Value to Realized Value)
- Near 1.0 = BTC undervalued
- Near 3.0–4.0 = overheated
- March 2020 & late 2024 rate cuts caused MVRV to crash, then rebound sharply
🐋 Whale Ratio
- High ratio = whales sending coins to exchanges (sell pressure)
- Low ratio = whales accumulating
“In 2020 and again in late 2024, whales sold into panic but later re-entered,” says Skew, a market analyst on X.
If history repeats, the early stages of rate cuts may bring turbulence — but the liquidity injection that follows often fuels multi-month rallies.
What to Watch: CPI & Whale Flows
While the PPI suggests inflation is cooling, analysts caution that Consumer Price Index (CPI) may lag by 1–3 months. Sticky CPI could temper short-term euphoria. Meanwhile, whale activity remains a wildcard.
“Watch for institutional dip-buying and ETF inflows to balance any whale-driven pressure,” noted Nick Ruck of LVRG Research.
Final Thoughts: The Fed May Light Bitcoin’s Fuse
With the Fed pivot narrative gaining strength and macro tailwinds aligning, Bitcoin appears poised for higher highs — provided it can ride out short-term volatility.
A confirmed rate cut in September could inject fresh liquidity into markets, echoing the 2020–2021 bull cycle playbook.
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