Inflation data burns the Fed's rate cut expectations, Bitcoin falls back from its high and loses $117,000, Jackson Hole annual meeting is the focus this week | Major crypto events this week

Welcome to the Asia-Pacific Crypto Morning Report brought to you by Paul Kim. Last week, Bitcoin rapidly pulled back after reaching a historic high of $124,000, briefly falling below the $117,000 mark, mainly due to unexpectedly high inflation data that severely impacted the Fed's interest rate cut expectations — the market bet that the number of rate cuts this year has shrunk from three to two. The key drivers were the unexpected surge of 0.9% in the July PPI wholesale price index (the largest monthly increase in three years) and a sharp rise in the import price index, indicating that tariff costs are fully being passed on to consumers. This week, the market is focused on the Jackson Hole Global Central Bank Annual Meeting, where Powell's speech early Friday morning may release key policy signals. Ethereum has failed to break through the previous high of $4,860 and is currently reported at $4,460.

Inflation Burns Rate Cut Dreams: Three Rate Cut Expectations Shrink to Two

The cryptocurrency market experienced severe fluctuations last week, with several unexpected inflation indicators forcing investors to lower their expectations for aggressive rate cuts by the Fed. Bitcoin rapidly pulled back after reaching a historic high of $124,000, falling below $117,000 at its lowest. Although the overall July CPI consumer price index released on Tuesday was below expectations, the core CPI excluding food and energy, as well as the "Supercore CPI" excluding housing, accelerated upward, particularly the latter, which has shown a steep upward slope since April, indicating continued inflation in the service sector.

Tariff Costs Finally Transmitted: PPI Hits Three-Year High, Raising Alarms

The Producer Price Index (PPI) for July released on Thursday has triggered a greater shock. This indicator, which measures wholesale inflation, unexpectedly surged by 0.9% month-on-month, marking the largest single-month increase in three years, reversing the stable situation during the escalation of the "trade war" in May and June. Trade experts interpret this as a delayed response to the tariff policy: companies previously absorbed costs by stocking up on inventory, and the July data indicates that their financial pressure has reached its limit, starting to transfer costs downstream in the supply chain, with service prices once again becoming a major driving force.

Inflection Point in Import Prices: Companies Transfer Pressure Directly to End Consumption

The most alarming signal for the market is the US import price index in July. Traditional economic theory holds that tariffs push up import prices, and the Trump administration previously used the stable data from May and June to argue that its trade policy had not triggered inflation. However, the sudden surge in import prices in July marks a critical turning point, indicating that import and export enterprises have ended the cost absorption phase and are officially passing the pressure onto end consumers. The Fed has expressed concerns about the inflationary effects of tariffs in the last two FOMC meetings, and if trade policies continue to push up import prices in August, it will further compress the Fed's room for interest rate cuts.

Market Expectations Shift Rapidly: BTC ETF Fund Flow Turns from Inflows to Outflows

The changes in the macro environment directly impact the price of Bitcoin. On Thursday, Treasury Secretary Scott Bessent hinted at a possible 50 basis point rate cut in September, propelling Bitcoin to soar to $124,000, but after the release of PPI data, the gains were completely wiped out, and Bessent revised his suggestion to a conservative 25 basis point cut. The CME FedWatch Tool shows that as of Friday, market expectations for rate cuts this year have dropped from three to two. The flow of funds also confirms the shift in sentiment: during the release period of the import price index on Friday, the deposit volume of Bitcoin on Binance surged (which typically indicates selling), and the Bitcoin and Ether spot ETFs ended the week with a net outflow after previously experiencing inflows.

Altcoins Under Pressure: ETH Fails to Break Previous High and Stabilizes at $4460

Shitcoins have failed to stand out on their own. Although Ethereum reached a historic high last Monday, it was unable to break through the previous high of $4,860 throughout the week, closing at $4,460 as of 00:00 Beijing time on Monday. The market liquidity rotation is evident, and risk-averse sentiment is rising.

This Week's Core Focus: Powell's Tone at the Jackson Hole Annual Meeting

Last week, what seemed like a certain "three consecutive rate cuts within the year" has fallen into uncertainty. Although the weak U.S. employment data in July supports easing, the resurgence of inflation puts the Fed in a dilemma. The responsibility for decision-making falls on Fed Chairman Powell. The financial community will closely watch the Jackson Hole Global Central Bank Annual Meeting hosted by the Kansas Fed from August 21-23, where Powell will deliver a monetary policy speech at 10:00 AM Beijing time on Friday. Last September, he hinted at a 50 basis point rate cut here, causing a huge shock in the market, and whether history will repeat itself is highly anticipated.

Dovish Officials Express Stance: FOMC Minutes May Cause Volatility

This week, two heavyweight dovish officials from the Fed will speak: Vice Chair Bowman (Wednesday) and Governor Waller (Thursday). Both have previously called for preemptive rate cuts citing economic slowdown and a weak labor market, and investors will be watching to see if their positions shift due to inflation data. If the minutes from the July FOMC meeting released on Wednesday show more members supporting rate cuts, it may reignite market expectations for easing and trigger a new round of volatility for Bitcoin.

Conclusion

Inflation data continuously "exploding" forces the market to restructure the Fed's policy path, with cryptocurrencies and traditional risk assets facing pressure simultaneously. This week, the Jackson Hole annual meeting becomes a key battleground for bulls and bears, with Powell's speech tone and the evolution of dovish officials' positions dominating short-term market sentiment. During the Asia-Pacific trading session, be cautious of: 1) If BTC loses the critical support of $115,000, it may trigger a technical sell-off; 2) Whether ETH can regain momentum by leveraging the advantages of spot ETF funding; 3) In the inflation-rate cut game, the volatility of assets like XRP, which face regulatory hurdles, may intensify. Investors are advised to control their positions and pay attention to real-time changes in Fed signals and ETF capital flows. Wishing you a successful investment week.