On the evening of August 14th, Beijing time, the crypto market experienced a rapid decline after the release of US PPI data. The data showed that the US PPI for July surged to 0.9% month-over-month and reached a three-year high, rising to 3.3% year-over-year. Following the news, the crypto market plummeted. According to OKX market data, Bitcoin fell from yesterday's high of around $124,500 to around $117,156 in the early hours of the 15th. Ethereum fell from yesterday's high of $4,790 to $4,451 in the early hours of the 15th. Previously, Tuesday's CPI figures, slightly below expectations, had fueled market expectations of a possible September Federal Reserve rate cut, with some even predicting a 50 basis point cut. However, after the unexpected PPI data was released, market expectations for a 50bp rate cut were largely eliminated. According to CME's "FedWatch," the probability of a 25bp rate cut also dropped from near certainty to approximately 92.1%. After a short-term price drop, the crypto market rebounded today, but future macroeconomic uncertainty remains. The unexpected surge in PPI reduces the probability of a September rate cut. The Producer Price Index (PPI) measures changes in the average price of goods and services sold by domestic producers. As an upstream price indicator, it reflects inflationary pressures before the CPI (Consumer Price Index). If the PPI continues to rise, production costs will increase, which will typically be transmitted to consumer prices several months later. The PPI increase significantly exceeded expectations. In-depth analysis revealed that the service-related PPI rose 1.1% month-over-month, the largest increase since March 2022. In particular, a 2% jump in profit margins for machinery and equipment wholesalers was a significant driver of the PPI. Regarding the cost of imported goods, some analysts noted that while businesses previously absorbed significant tariff costs, these are now being "gradually passed on" to manufacturers and consumers, and inflation is expected to continue to rise moderately in the second half of the year. "While businesses have borne most of the burden of rising tariff costs so far, the rising cost of imported goods is increasingly squeezing profit margins," said Ben Ayers, senior economist at Nationwide, in a report. "We expect tariff costs to be passed through to consumer prices more significantly in the coming months, with inflation likely to rise modestly in the second half of 2025." The report showed that despite slowing demand in the first half of this year, businesses are still adjusting the pricing of their goods and services to help offset the cost pressures from rising U.S. tariffs. The surge in the PPI indicates that suppressed inflationary factors are being released, particularly rising prices in manufacturing and services, which may signal an accelerated rebound in the CPI. The previous decline in the CPI fueled market optimism, but the strong rebound in the PPI suggests that cost pressures are still accumulating on the production side. Before the PPI release, the market generally expected a 25-50 basis point interest rate cut in September, with a near 100% probability. After the data was released, the probability of a 25 basis point cut dropped to approximately 92%, while the possibility of a 50 basis point cut was all but eliminated. Cryptocurrencies experience short-term recovery, but uncertainty remains. Despite a short-term market dip on the evening of August 14th, both Bitcoin and Ethereum had rebounded slightly by the daytime of August 15th (Beijing time). For investors optimistic about the future market outlook, last night could have been a good time to buy the dip. However, this unexpected PPI reading serves as a reminder to the market that inflation remains far from under control, and an interest rate cut is far from certain. In the short term, the market recovery is primarily driven by a rebound from a technical oversell and bargain-hunting by some investors, but the macroeconomic landscape remains uncertain. The Federal Reserve's policy direction in September will be highly dependent on key data releases such as inflation and employment in the coming weeks. If inflation continues to be strong, the magnitude and pace of rate cuts may fall short of previously expected, and the timing of improved market liquidity will also be delayed. For the crypto market, fluctuations in macro liquidity and risk appetite often amplify price volatility. When positive expectations prevail, core assets like Bitcoin and Ethereum are expected to reach key resistance levels above. However, if data continues to undermine expectations of easing, the market may face renewed downward pressure. Between now and the Federal Reserve's September meeting, three key data sets will determine whether or not to cut interest rates. First, inflation-related data: the CPI, PPI, and PCE price index, particularly the core PCE, which is the Fed's most closely watched inflation measure. Second, labor market data: the non-farm payroll report and unemployment claims, which reflect economic resilience and employment trends. Third, macroeconomic activity and consumption signals: leading indicators such as retail sales, ISM manufacturing, and services PMIs. These data sets will be released sequentially from late August to mid-September. Following these releases, the Federal Reserve will hold its next interest rate meeting on September 16-17, 2025, at which time it will announce its interest rate decision. Against this backdrop, both cryptocurrencies and US stocks will be highly sensitive to macroeconomic data. Investors need to understand the timing and avoid making unilateral bets on policy direction.
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