Over the past 24 hours, Bitcoin and Ethereum prices have experienced a significant decline, driven by recent market developments that have triggered a bearish sentiment among investors, resulting in a flurry of selling activities.
Reasons for Bitcoin and Ethereum Price Declines
According to data from CoinMarketCap, both Bitcoin and Ethereum prices have dropped by more than 3% and 2%, respectively, within the last day. This downward trend can be attributed in part to the remarks made by U.S. Treasury Secretary Scott Bessent regarding the proposed Strategic Bitcoin Reserve during an interview on Fox Business.
Bessent clarified that the U.S. government does not intend to purchase Bitcoin but disclosed that they currently hold Bitcoin valued between $15 and $20 billion, with plans to utilize confiscated assets instead of selling them. This stance was perceived as negative by investors, especially in light of President Donald Trump’s earlier executive order hinting at potential Bitcoin purchases.
Moreover, Bessent’s comments indicated a lack of support for Senator Cynthia’s BITCOIN Act, which proposes the acquisition of 1 million BTC over five years. The market had previously factored in the bullish implications of this bill for Bitcoin and Ethereum prices.
On a positive note, Bessent’s revelation about the U.S.’s existing Bitcoin holdings not being sold contradicted earlier reports suggesting substantial sell-offs. Contrary to the U.S. Marshals’ statement of holding 28,988.356 BTC, Arkham data reveals a stash of 198,022 BTC, valued at approximately $23 billion.
Influence of U.S. PPI Data on the Price Decline
The release of U.S. Producer Price Index (PPI) data further exacerbated the decline in Bitcoin and Ethereum prices. Recent figures from the Labor Department showed a 3.3% year-on-year (YoY) increase in PPI inflation for July, surpassing the anticipated 2.5%. Additionally, the monthly PPI surged to 0.9%, significantly higher than the expected 0.2%.
Following the data release, both cryptocurrencies experienced a sharp downturn. The bearish implications of the PPI data lie in its potential impact on the Federal Reserve’s decision regarding interest rate cuts at the upcoming September Federal Open Market Committee (FOMC) meeting.
Prior to the PPI announcement, CME Fedwatch data indicated a 99% probability of a 25 basis point rate reduction in September, which has now slightly decreased to around 93%. The prospect of rising inflation in the U.S. poses challenges for Bitcoin and Ethereum prices, as it could restrict investor allocations to these high-risk assets.
