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Bitcoin Hits Record $124K Before Pullback as Inflation Fears Rise
Bitcoin traded lower on Friday, retreating from its recent all-time high above $124,000. The drop followed stronger-than-expected U.S. producer price inflation data, which reduced hopes for a large Federal Reserve rate cut next month. As of early Friday morning, Bitcoin was down about 2.2%, trading near $119,100.
The cryptocurrency reached a peak of $124,436 during the previous session but sharply reversed course after the U.S. Labor Department released the Producer Price Index (PPI) report. The report showed a 0.9% monthly increase in producer prices for July, the largest rise since June 2022, well above economists’ forecasts of 0.2%. This inflation surprise has raised concerns that the Federal Reserve might slow the pace of interest rate reductions.
Investors Adjust Expectations for Fed Rate Cuts
The higher-than-expected PPI reading has caused investors to rethink their bets on how much the Federal Reserve will cut interest rates in September. Previously, markets anticipated a 50 basis point cut, but after the inflation data, expectations shifted toward a smaller 25 basis point reduction. Current money market pricing reflects around a 90% chance of a quarter-point cut.
This shift in sentiment lifted the U.S. dollar and put pressure on riskier assets, including cryptocurrencies. Many traders and investors had grown optimistic earlier in the week after a softer consumer inflation report and signs of renewed institutional interest in digital assets.
Ethereum and Altcoins Also Decline After Recent Gains
Following Bitcoin’s pullback, most major altcoins also fell on Friday after strong performances earlier in the week.
Ethereum, the second-largest cryptocurrency by market cap, dropped about 2.9% to $4,640 after nearing record highs during the previous session. XRP declined 4.1%, trading near $3.13.
Other notable altcoins saw similar drops: Solana fell 5.1%, Cardano slid over 6%, and Polygon lost 5.5%. Meme coins also followed the downtrend, with Dogecoin falling 7% and $TRUMP dropping 5.6%.
American Bitcoin Plans Expansion in Asia
In related news, American Bitcoin, a U.S.-based cryptocurrency mining company backed by Donald Trump Jr. and Eric Trump, is reportedly planning acquisitions in Asia to build its bitcoin reserves. According to reports, the company aims to acquire a listed firm in Japan and possibly another in Hong Kong. This strategy is seen as similar to that of Michael Saylor, a well-known Bitcoin advocate and investor.
American Bitcoin is preparing to go public in September through a reverse merger with Gryphon Digital Mining. The company said it is exploring “accretive opportunities” overseas but has not made any binding commitments yet.
What This Means for Crypto Investors
The recent volatility highlights the close link between traditional financial indicators, like inflation data, and cryptocurrency price movements. Stronger inflation readings can dampen expectations for Federal Reserve easing, which in turn puts downward pressure on digital assets.
While Bitcoin and major altcoins have pulled back after hitting new highs, many market participants remain watchful of upcoming economic reports and Federal Reserve decisions. The crypto market’s sensitivity to macroeconomic news suggests that investors should be prepared for continued volatility in the near term.
