Bitcoin Slips to $77,200 as Inflation Data Boosts Fed Rate Hike Odds

Bitcoin (BTC) fell on Thursday, as a key U.S. inflation report came in hotter than anticipated, bolstering investor expectations that the Federal Reserve will raise interest rates at its September meeting. The leading cryptocurrency declined 1.2% to trade at $77,189.8 by late afternoon, according to Investing.com data.

Producer Inflation Fuels Rate Hike Bets

The primary catalyst for the market's risk-off sentiment was the August U.S. producer price index (PPI) report. The Bureau of Labor Statistics reported that headline PPI rose 0.4% month-over-month and 5.4% year-over-year, slightly above the consensus forecast for a 5.3% annual increase.

Following the data, the probability of a quarter-point rate hike by the Federal Open Market Committee (FOMC) on September 16 rose to nearly 72%, up from about 64% prior to the report, according to the CME FedWatch tool. Higher interest rate environments tend to diminish the appeal of non-yielding, speculative assets such as cryptocurrencies.

Broader Market Reacts to Macro Pressures

The reaction was felt across traditional markets, with U.S. Treasury yields climbing sharply as investors sold off government bonds. The benchmark 10-year Treasury yield surged 13.1 basis points to 4.968%, while the more rate-sensitive 2-year yield added 16.1 basis points to 4.588%.

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Adding to inflationary concerns, oil prices continued their recent rally. U.S. West Texas Intermediate (WTI) crude futures surpassed $100 a barrel for the first time since May, driven by what the source described as a resurgence in military action between the U.S. and Iran over the Strait of Hormuz.

Altcoins Follow Bitcoin Lower

The downturn was not isolated to Bitcoin, as the broader cryptocurrency market saw widespread declines. Other major digital assets tracked the negative sentiment:

• Ether (ETH), the second-largest cryptocurrency, traded marginally lower at $2,460.33.
• XRP fell by 3.1%.
• Other major altcoins including BNB, Cardano (ADA), and Solana (SOL) posted losses between 1.5% and 2.2%.