The cryptocurrency market took a sudden tumble this Thursday. Big losses wiped away many of the gains seen just a day earlier. Two major economic blows caused this sharp downturn. First, US inflation numbers came in hotter than expected. Then, a top Treasury official stated the US government has no plans to buy Bitcoin.
The total market value of cryptocurrencies dropped by 2.2% in 24 hours. This erased some of the record high of $4.2 trillion reached on Wednesday, according to CoinGecko. Bitcoin, the largest digital coin, fell below a key support level. It had just hit a peak above $124,000, only to reverse course sharply.
Inflation Fears Reignite
The US Producer Price Index (PPI) report for July landed this morning. It showed prices rose by 0.9% from the previous month. Economists had only expected a 0.2% increase. Annually, the PPI climbed 3.3%. This was higher than the 2.5% forecast. It also marked the largest 12-month jump since February. The Federal Reserve aims for 2% inflation, so this was a clear miss. Core PPI, which excludes food and energy, also surprised. It rose 0.9% monthly and 3.7% annually. Experts had looked for 0.2% and 2.9% respectively. These figures point to rising inflation at the wholesale level. This makes it less likely the Federal Reserve will cut interest rates soon.
Hopes for a September rate cut have faded. The CME FedWatch tool showed a near 100% chance for a cut on Tuesday. After the PPI report, that probability dropped to 96%. “The job market is still tight,” said Krisztian Sandor, a markets reporter at CoinDesk. He noted 224,000 jobless claims last week, slightly less than expected. “With persistent inflation and a strong job market, the Fed might keep rates high to control prices,” Sandor added. Traditional markets also felt the pinch. US stock index futures fell 0.5%. The dollar got stronger. The yield on the 10-year Treasury bond rose five basis points to 4.25%. This was reported by CNBC.
US Treasury Says No to Bitcoin Buys
Adding to the market’s woes was a political statement from the US Treasury Department. On Wednesday, the Treasury shot down the idea of the government buying Bitcoin for its strategic reserves. President Donald Trump had previously ordered a look into “budget-neutral” ways to increase Bitcoin holdings. These ideas included using tariff income or revaluing gold certificates.
Treasury Secretary Scott Bessent spoke with Fox Business this morning. He confirmed the government has no plans to buy more Bitcoin for its digital asset reserve. “We are entering the 21st century with a Bitcoin reserve,” Bessent stated. “But we are not going to be buying it. We will use confiscated assets and continue to build it that way.”
🚨BESSENT: WE ARE NOT BUYING BITCOIN
🇺🇸 US Treasury Secretary Scott Bessent says “we are not going to be buying” — but confirmed the U.S. will keep confiscated assets as part of its BTC reserves. 🪙 pic.twitter.com/OGTewOzp5E
— Coin Bureau (@coinbureau)
Some figures, like Bo Hines, a former advisor to the Digital Asset Presidential Council, had suggested ways to fund government Bitcoin buys. However, Bessent’s firm stance raises concerns. Some worry about a “nationalization” of assets, like Fort Knox. Though, in this case, it would only apply to seized assets.
Market Volatility Rises
Bessent’s comments came at a rough time for Bitcoin. The digital currency had just briefly overtaken Google’s market value of $2.4 trillion. This made Bitcoin the fifth largest asset globally. After the news, Bitcoin (BTC) dropped nearly 3% from its previous day’s price. It traded below $119,000 before a small rebound, CoinGecko data shows. This was a notable fall from its record high of $124,000 achieved last night. Other smaller cryptocurrencies, known as altcoins, saw bigger hits. Dogecoin (DOGE), for instance, lost up to 6%.
“The market was very excited after Bitcoin passed Google’s value,” said James Van Straten. He is a senior analyst at CoinDesk, specializing in Bitcoin and macroeconomics. “But these economic figures and the Treasury’s position threw a bucket of cold water on that enthusiasm.” The crypto market saw over $1 billion in liquidations in 24 hours. This shows how quickly prices reversed and how volatile the market is. While major cryptocurrencies have recovered slightly since the earlier drop, analysts are now watching closely. They want to see the ongoing impact of these economic and political events.