Bitcoin (BTC) has surpassed $114,000 following new U.S. inflation data, strengthening expectations for a Federal Reserve rate cut next month.
Cooling Inflation
According to the U.S. Labor Department, the Producer Price Index (PPI) fell to 2.6% year-over-year, well below forecasts of 3.3%. Core PPI, excluding food and energy, dropped to 2.8%, compared to expectations of 3.5%.
On a monthly basis, PPI even turned negative, marking only the second contraction since March 2024. With downward revisions to July figures, the market now sees a September rate cut as likely.
Bitcoin Reacts to Fed Expectations
The cooling inflation data sparked Bitcoin's rise, reaching $114,000 before easing slightly to $113,967 at the time of writing. Historically, Bitcoin has shown volatility during Fed rate cuts but tends to rally afterwards.
On-chain data reveals that the Market Value to Realized Value (MVRV) ratio often indicates undervaluation when near 1 and overheated conditions around 3-4. The Whale Ratio provides insights into large holder activities.
Outlook for 2025
If history repeats, a Fed rate cut in September may trigger short-term turbulence. However, in the longer term, easing monetary policy could provide the liquidity backdrop for Bitcoin to push beyond recent highs.
Currently, Bitcoin's breakout above $114,000 highlights growing investor optimism that cooling inflation will allow the Federal Reserve to transition from tightening to easing.
Overall, the market's current state, supported by inflation data, indicates that Bitcoin has the potential for further growth if the Federal Reserve implements rate cuts in the future.
