Following the breaking news of the Producer Price Index (PPI) release, we previously warned that BTC could see a sharp drop. As this article was written, BTC had fallen below $79,700. There is an ongoing risk that this steep decline may continue, given that the details of the report are concerning. Moreover, the figures came in far above expectations, increasing the likelihood that this triggers a significant correction in the BTC chart.
Cryptocurrencies face mounting pressure
Consumer inflation (CPI) was already reported high yesterday, and now the US PPI has been announced at 6%. This indicates that the upward trend in consumer inflation is set to persist due to a rise in producer costs. Even if the war in Iran were to end today, inflation is expected to remain elevated for the long term, meaning the Fed will likely need to keep interest rates steady for an extended period.
Excluding food and energy, the US core producer price index climbed to its highest level since March 2022, rising 1% month-on-month in April, compared to the revised 0.2% in March. This surpasses market forecasts of a 0.3% increase. On an annual basis, core producer prices jumped to 5.2% in April from 4% in March, again exceeding the anticipated 4.3% rise.
The current reality is that expectations for Fed rate cuts are now postponed by at least a year. Market consensus is shifting away from rate cuts to the possibility of further hikes in the coming year. As a result, there is a risk that the rate cuts previously anticipated for the end of 2025 may be withdrawn. Warsh, when he takes office on Friday, is expected to relaunch quantitative easing (QE), but with strong job data and sharply rising inflation, the path for rate cuts he previously discussed is now effectively blocked. Cryptocurrencies now find themselves squeezed on two fronts in the macro environment.
Key details from the US PPI report
The US Bureau of Labor Statistics announced today that the Producer Price Index rose a seasonally adjusted 1.4% in April. Stripping out food, energy, and trade services, the final demand index climbed 0.6% in April, marking the largest one-month increase since October 2025’s 0.6%. Over the 12 months ending in April, prices for final demand excluding these volatile components soared 4.4%, the largest annual increase since the 4.5% spike seen in February 2023.
Throughout 2025, monthly PPI increases remained within a 0.2% to 0.4% band. However, a period of steady acceleration began at the start of 2026 (January: 0.6%, February: 0.6%, March: 0.7%). This momentum, largely fueled by the Iran conflict, still persists. Notably, energy experienced a double-digit surge, with a 10.1% increase in March and a further 7.8% jump in April. These sustained increases in energy costs have the potential to disrupt entire production and distribution chains.
Rising inflation is not limited to energy but has also spread into the services sector. For example, transportation and storage costs jumped from 1.8% in March to 5% in April. These surging logistics expenses (including freight, fuel, and warehousing) have led to a swift escalation in the “Trade” component, which also saw a 2.7% jump. This widespread transmission risk is precisely what Fed members refer to as the “contagion effect.”
The sticky nature of core inflation now signals that price pressures are here to stay, even if the Iran war ends. The core measure, which stood at 2.7% in April 2025, has risen gradually, reaching 4.4% by April 2026. With the Fed having gotten so close to its 2% inflation target, this abrupt reversal could spell electoral disaster for Trump in the November elections this year. Ultimately, these developments add to the headwinds facing cryptocurrencies.
