Bitcoin dropped below $77,000 after a stronger-than-expected rise in US producer prices triggered a broad market sell-off and increased expectations that the Federal Reserve will not cut interest rates at its next meeting.
The cryptocurrency fell to a daily low of $76,651 on Thursday, according to Bitstamp, shortly after the US Bureau of Labor Statistics reported that the Producer Price Index (PPI) had risen by 0.4% month on month.
The increase was largely anticipated, but the marginally higher reading unsettled investors. Before the data was released, Bitcoin had been trading in a relatively narrow range between $78,000 and $79,000.
Bitcoin later recovered above $77,000 but remained more than 2.5% lower over 24 hours. Its market capitalisation fell to $1.55 trillion.
Ten days into September, Bitcoin had made no upward progress. Without a fresh macroeconomic catalyst, the price could finish the month broadly unchanged.
The move lower caused significant losses for traders holding leveraged positions. Almost $74m in long liquidations were recorded in the four hours after the PPI figures were published, taking 24-hour long liquidations to $112m.
That compared with $8m in short liquidations. Across the wider cryptocurrency market, liquidations reached $562m, with long positions accounting for about $484m.
Rate expectations and bond market pressure
Immediately after the release, bettors on Polymarket and Kalshi raised the probability of a 25-basis-point rate hike to 63%, up nine percentage points. The CME FedWatch tool placed the figure at 67%.
Economists are expecting the US Consumer Price Index (CPI) report to show that annual inflation slowed to 3.3% in August, from 3.4% in July. On a monthly basis, however, they forecast a 0.4% increase in consumer prices, following July’s 0.1% rise.
The fall in crypto prices came as part of a wider dispute between bond investors and Washington over the direction of long-term borrowing costs.
The US Treasury sought to limit long-term yields by tripling its buyback operations to $6bn. The move failed to calm the bond market, which quickly rejected the intervention.
The benchmark 10-year US Treasury yield climbed above 4.90%, representing a 95-basis-point rise since the start of the conflict with Iran. It added a further 10 basis points after the Treasury announced the expanded buyback programme.
Analysts said the development showed the limits of using buybacks to control yields while wider economic pressures, including elevated Brent crude oil prices and record issuance volumes, were demanding a higher term premium.
With the 10-year yield nearing 5.00%, borrowing costs for the US government and American consumers are expected to rise further. Mortgage rates have also increased in line with Treasury yields, effectively bringing residential property transactions to a halt.
A post on X by the Kobeissi Letter described the apparent confrontation between the US Treasury and the bond market as setting up a “highly eventful Q4”.
Bitcoin remained between $77,650 and $78,000 even as President Donald Trump offered $5,000 dividend cheques to American adults.
