PPI’s bigger-than-expected drop strengthens the logic of cooling inflation—can BTC’s rebound continue?

On the evening of July 15, the U.S. Department of Labor released the June Producer Price Index (PPI): the year-over-year rate came in at 5.5%, sharply below the market expectation of 6.2%, down 1 percentage point from the prior value of 6.5%; on a month-over-month basis, it fell 0.3%, also missing expectations of flat. The core PPI, excluding food and energy, likewise came in below market forecasts. As a key leading indicator of inflation, this PPI data echoed the CPI released the previous day, further confirming the downtrend in U.S. inflation. It directly rattled global risk-asset pricing, and the Bitcoin market also saw a mood-driven rebound.

After the data was released, the U.S. Dollar Index briefly plunged to 100.94, and the 10-year U.S. Treasury yield quickly dropped. U.S. stock index futures for the Nasdaq jumped 0.5%, while spot gold also narrowed its decline. As a risk asset highly tied to U.S. dollar liquidity, Bitcoin continued the post-CPI rally, pushing further toward the $65,000 level during the day. The 24-hour gain expanded to more than 4%. Ethereum also surged more than 6%. Across the whole market, the short liquidations exceeded $220 million, and risk appetite quickly warmed back up.

The core logic behind this crypto-market rebound is a shift in expectations for the Federal Reserve’s monetary policy. Previously, driven by energy prices, the market had once bet on the Fed restarting rate hikes within the year. CME’s rate tool showed the July rate-hike probability at a peak of 43%. In a high-interest-rate environment, risk-free returns from Treasuries kept rising, significantly increasing the opportunity cost of holding non-yielding assets like Bitcoin, which meant the coin price remained under long-term pressure below the $60k level. However, as both CPI and PPI—two major inflation indicators—fell below expectations, rate-hike expectations cooled rapidly. The July rate-hike probability then dropped sharply to 13%, and the timing window for rate cuts was also priced in earlier by the market. The pressure of tighter U.S. dollar liquidity was partially relieved in the near term, becoming the main driving force behind this risk-asset rebound.

But it’s important to note that there are multiple hidden risks to the durability of this rebound. On one hand, spot Bitcoin ETFs in the U.S. have recently continued to show net capital outflows, and top-operator product subscription interest has been weak. Without incremental capital support, a sustained uptrend is difficult to form. On the other hand, uncertainty remains in the Middle East geopolitical situation; energy-price volatility could reverse the inflation-cooling trajectory at any time. Also, Fed Chair Waller has previously emphasized “zero tolerance” toward inflation multiple times, so there remains the possibility of further hawkish back-and-forth in subsequent policy remarks. In addition, there is a lag in the transmission from PPI to CPI. Whether inflation can continue falling to the 2% policy target still needs verification. Current optimistic market expectations carry the risk of being priced in too early.

From a short-term perspective, after the PPI data lands and the inflation-related negative impact is exhausted in stages, BTC could continue a choppy recovery and consolidation in the $64,000–$65,000 range, but investors should not blindly chase higher prices. Going forward, key focus should be on speeches from Federal Reserve officials, monthly employment data, and changes in ETF fund flows. If expectations for policy easing are further confirmed, BTC would only then have the momentum to break above resistance; otherwise, if inflation expectations see renewed swings, the coin price may still risk returning to range-bound consolidation.