Uncertainty in the Cryptocurrency Market
Uncertainty has re-emerged in the cryptocurrency market, bringing an end to the gains observed in August. This is due to the latest Producer Price Index (PPI) data release, which significantly surpassed expectations. Last Sunday, we highlighted the importance of the forthcoming data. Those who closely monitored the news faced less impact from the downturn as our warning about the PPI came when Bitcoin 
$118,588 was still trading above $120,000. Now, Bitcoin is at $118,000. But what is driving this decline? Why are cryptocurrencies falling?
Reasons Behind the Cryptocurrency Dip
The PPI data exceeded expectations significantly, with a monthly increase of 0.9%. If even half of this increase reflects in the Consumer Price Index (CPI), it could lead to serious issues. Additionally, the PPI is crucial for the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index. This gives Fed Chair Jerome Powell the grounds to justify avoiding interest rate cuts, citing the effects of tariffs. 
Cryptocurrencies still have many reasons for an upward trend, yet the latest developments provide reasons for cleaning out excessive long positions, possibly testing levels around $116,000. The more critical issue could be Ethereum 
$4,558 losing its $4,100 price support, indicating a failed resistance test.
Though Ethereum prices have retraced to $4,500, they currently hold that level. For traders seeking short opportunities in rapidly rising altcoins, sudden price surges remain surprising. In just the past hour, positions worth $564 million were liquidated, with $537 million being long positions.
The Impact of PPI on Interest Rates
Bessent discussed the possibility of a 50 basis point rate cut just before the PPI data came in well above expectations, leading to a downgrade in September rate cut expectations. On the previous day, Fed’s Goolsbee expressed concerns over tariff impacts on inflation while maintaining confidence in a strong labor market. 
The PPI report noted the largest increase in a 12-month period since February 2025, with significant hikes in food, energy, and trade services. Excluding these areas, the final demand index rose 0.6% in July, marking the largest increase since March 2022’s 0.9% spike. Over a 12-month span ending in July, final demand prices excluding food, energy, and trade services rose by 2.8%.
The processed goods index saw its first notable increase since January’s heightened tariff concerns, with processed energy products up by 2.2%. The rise was largely driven by an 11.8% increase in diesel fuel, emphasizing deeper tariff impacts in the data. Overall, more than three-quarters of July’s broad-based rise stemmed from a 1.1% increase in final demand services. Final demand goods prices rose by 0.7%, fueled by a 3.8% increase in machinery and equipment wholesale margins. This data reveals clearer evidence of tariffs’ impacts.
As all countries implemented tariffs in August, the effects on PPI data will become even more apparent. The Federal Reserve will take these factors into account before making decisions in the September meeting. Continued increases could deter interest rate cuts, and maintaining rates might become a dovish stance, which could negatively affect risk markets.
