Bitcoin has climbed past $114,000, reaching levels not seen since late August, after fresh US inflation figures signaled a sharper cooldown than expected. The August Producer Price Index (PPI) came in at 2.6% year-over-year, well below the 3.3% forecast. Core PPI, excluding food and energy, also eased to 2.8%, against consensus estimates of 3.5%.
On a monthly basis, producer prices even slipped into negative territory, marking only the second decline since March 2024, according to the Kobeissi newsletter. July’s numbers were also revised downward, with headline PPI adjusted from 3.4% to 3.1% and core PPI lowered from 3.7% to 3.4%. Combined with the major revision of US labor data earlier this week—which wiped out 911,000 jobs from the past year—markets are now increasingly confident that rate cuts are just around the corner.
Market strategist Skew highlighted that producer inflation typically trails consumer inflation by one to three months. This means CPI may still show stubborn readings in the near term, but overall trends point to inflation cooling into the final quarter of the year. Until CPI aligns with PPI, some hedging activity is likely to continue.
How Bitcoin reacts to Fed cuts
Historically, Bitcoin has shown a familiar playbook during periods of Federal Reserve easing: short-term volatility, followed by renewed upside momentum. Two key on-chain metrics—Market Value to Realized Value (MVRV) and the Whale Ratio—illustrate the dynamics at play.
MVRV tracks the relationship between Bitcoin’s current market value and the realized value of coins based on their last move. An MVRV near 1 suggests the asset is undervalued, while levels closer to 3 or 4 indicate frothy conditions.
The Whale Ratio, on the other hand, gauges the proportion of large holders in exchange flows, signaling when whales are preparing to sell or instead moving coins off exchanges for storage.
CryptoQuant data shows that in March 2020, when the Fed slashed rates, MVRV collapsed near 1 as panic erased speculative gains, while whale activity spiked as major holders dumped coins. Once liquidity surged back into markets, whales resumed accumulation, helping ignite the 2020–2021 bull market. A similar scenario unfolded during the late 2024 easing cycle, with an initial selloff giving way to renewed strength.
If this pattern repeats, potential Fed cuts in 2025 may bring early turbulence but could ultimately provide the liquidity fuel for Bitcoin to push toward new record highs.
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