"Bitcoin" Falls by More Than 4% After Stronger Than Expected U.S. Inflation Data

SadaNews - A stronger than expected inflation reading reminded investors that "Bitcoin" remains a highly volatile asset, just hours after the cryptocurrency reached a new all-time high.

"Bitcoin" fell by more than 4% within minutes after government data showed a surge in U.S. wholesale prices during July at the fastest pace in three years, causing stocks to decline and reducing expectations for interest rate cuts. "Bitcoin" dropped from a peak of $124,515 late Wednesday in New York, a new record after the previous peak recorded in July.

The mood shifted further due to Treasury Secretary Scott Pisent's remarks on "Fox Business" that the United States will not buy more "Bitcoin" for President Donald Trump’s strategic cryptocurrency reserve.

Later, Pisent clarified in a statement via the "X" platform that "the Treasury Department is committed to exploring budget-neutral pathways to purchase more Bitcoins to expand the reserve, fulfilling the President’s promise to make the United States 'the mightiest Bitcoin power in the world.'"

By 4:06 PM in New York, "Bitcoin" was trading at around $118,100. The currency had risen throughout most of the past year due to the supportive legislative environment in Washington since Trump took office.

Listed companies, led by "Strategy" under Michael Saylor, have boosted demand by following an increasingly popular strategy of storing the digital currency, and this approach has recently extended to smaller rivals like "Ether," leading to a broader rise in digital assets.

$1 Billion in Liquidations in Cryptocurrency Positions

However, the decline was swift on Thursday, as leveraged positions in cryptocurrency assets saw liquidations exceeding $1 billion in 24 hours, including $770 million in long positions and $269 million in short positions, according to data from "CoinGlass."

Thomas Perfumo, chief global economist at "Kraken," stated that "the recent decline in cryptocurrency prices following a stronger than expected reading of the core Producer Price Index seems to have shaken broader confidence in a rate cut next month."

He added that high inflation "underscores the appeal of cryptocurrencies with fixed or programmed supply in the long term, which have a better structure for preserving and even growing value."

This coordinated move between stocks and "Bitcoin" highlights how speculative angles in the markets and key indicators draw momentum from a single source of optimism. Earlier in the week, U.S. inflation data aligned with expectations, bolstering bets on rate cuts in September, which eased financial conditions and encouraged capital flow from leading stocks to highly volatile cryptocurrencies, before these bets shrank on Thursday.

Debate on Increasing Government "Bitcoin" Reserves

Despite Trump's executive order in January stating that the government would increase its holdings of "Bitcoin" through "budget-neutral" strategies, many cryptocurrency advocates assumed this would include the purchase of more coins, not just acquiring them through seizures in criminal cases. Some even speculated that the United States would reassess its gold reserves for use in purchasing more coins, which Pisent denied.

Pisent said in an interview on "Mornings with Maria" on "Fox": "We won't buy that, but we'll use the seized assets and continue to increase them, and we will stop selling them," adding, "I believe Bitcoin’s reserves, at current prices, range between $15 and $20 billion."

"Ether" Climbs Near Highest Level in 4 Years

The market capitalization of "Bitcoin" reached about $2.5 trillion and "Ether" around $575 billion at the price peaks, according to "CoinGecko." "Ether" was trading on Thursday close to its highest level in nearly four years at around $4,600.

The rise of "Ether" was driven by continued demand from recently active treasury firms, while "Bitcoin's" more gradual rise was supported by steady flows into exchange-traded funds, despite facing technical resistance. However, "Ether" experienced the largest share of liquidations in leveraged positions during the sharp downturn.

Chris Newhouse, research director at "Ergonia," stated: "Cryptocurrencies have been positively correlated with stocks, with the relationship being stronger for 'Ether' compared to 'Bitcoin,'" adding that "overall sentiment appears positive."