The Fed's interest rate cut trade hasn't gone far, and the market has already started to discuss another issue:

If inflation rises again, will the Fed continue to raise interest rates?

The U.S. PPI for August was released on September 10, showing a month-on-month increase of 0.4% in the final demand producer price index and a year-on-year increase of 5.4%, which is a significant acceleration compared to July's 4.8%. The core indicator is also relatively strong, with a 0.3% increase in final demand prices excluding food, energy, and trade services.

After the data was released, the market quickly repriced the Fed's policy path. Traders raised the probability of a 25 basis point rate hike at the meeting from September 15 to 16 to about 70%, while the 10-year U.S. Treasury yield briefly approached 4.93%.

BTC also fell below $77,000, touching around $76,651.

This time, what truly deserves attention is not the PPI itself, but the new pressure chain forming between inflation, interest rates, and leverage.

First, a summary

• U.S. August PPI year-on-year 5.4%, significantly accelerated from July's 4.8%
• Energy prices are the main driver, final demand energy prices increased by 4.2% in August
• Probability of a Fed rate hike in September rises to about 70%
• BTC fell from around $79,000, hitting a low of $76,651
• The scale of liquidations in the cryptocurrency market reached hundreds of millions, with bulls facing more significant impacts
• Today's CPI will be the next key verification, determining whether the market's pricing of the Fed tightens further

What is the PPI really worrying the market about?

Looking solely at the 5.4% figure, it is easy to conclude that "PPI is far beyond expectations."

In fact, the month-on-month increase of 0.4% in the August PPI is basically in line with market expectations, and while the year-on-year 5.4% is higher than previous levels, it’s not completely unexpected. The real issue is:

Inflation is accelerating again.

The prices of final demand goods increased by 1.1% in August, and energy prices rose 4.2%; among them, diesel prices skyrocketed by 24.1% in a single month. Meanwhile, service prices in sectors such as air travel and healthcare also rose.

This means that the market is worried not just about a single energy price shock, but that high oil prices could transmit through transport, production, and service costs into broader economic sectors.

And this is precisely the situation the Fed hopes to avoid.

Oil prices have become the second variable

This round of inflation pressure has a special background:

Oil prices are rising again.

The situation in the Middle East has led to increased concerns over oil supply, with WTI briefly surpassing $100 per barrel, and Brent crude also rising above $100.

Thus, the market has formed a relatively clear transmission chain:

Rising oil prices
→ Increased production costs
→ Higher PPI
→ CPI has continued upward risks
→ Fed interest rate hike expectations heat up
→ U.S. Treasury yields rise
→ Valuation pressures on risk assets.

BTC is at the end of this chain.

Therefore, the recent drop in BTC is not entirely due to internal problems within Crypto, but rather a result of macro liquidity tightening again.

Why did BTC drop so quickly?

After the PPI was released, BTC quickly fell from around $79,000, touching a low of about $76,651, retesting the $76,000–$77,000 range.

Meanwhile, leveraged funds began to be forced out.

Data shows that after the PPI was released, the liquidation scale in the crypto market reached approximately $562 million, with long positions clearly dominating the liquidations.

This formed a second feedback chain:

PPI is strong
→ Interest rate hike expectations rise
→ BTC falls
→ Long positions trigger stop-loss/liquidation
→ Forced selling
→ Further increases in downward pressure.

For a high-leverage market, macro data often acts as the "first domino," and what truly amplifies volatility is the subsequent strong liquidations.

$77,000 becomes the short-term watershed

Currently, the most important thing to observe about BTC is not a specific rebound target, but whether the $76,000–$77,000 range can hold.

Previously, the market had formed a relatively clear demand and leverage positions in this area.

If CPI comes in below expectations, the market may lower interest rate hike pricing again, giving BTC a chance to recover part of the drop caused by the PPI.

However, if CPI turns out to be strong again, the market could further trade "high rates persist longer," and if $77,000 is lost, previous long positions may continue to be released.

Today's real test is the CPI

PPI is just the first data point.

CPI is the key that will determine how the market prices the next steps.

The Fed will hold a meeting from September 15 to 16, so today's released August CPI will become the last significant inflation data before the meeting.

For BTC, three variables can be focused on:

Whether the year-on-year CPI continues to rise;
Whether the core CPI shows significant cooling;
Whether oil price increases start to spread to core inflation.

If CPI is moderate, the market may begin to trade on "inflation is controllable," and BTC's pressure is likely to ease.

If CPI continues to surpass expectations, then the negativity brought by the PPI may shift from a one-time shock to a prolonged macro repricing.

This is also the true key to whether BTC can hold above $77,000 going forward.

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