Bitcoin tumbled below $79,700 on May 13 after the US Bureau of Labor Statistics reported a 6% year-over-year jump in the April Producer Price Index (PPI), far exceeding expectations and fueling broad inflation concerns across digital assets.
PPI Data Breaks Expectations: Core Index Hits Highest Since March 2022
The core PPI, excluding food and energy, rose 1% month-over-month in April, a sharp acceleration from March's revised 0.2% and above the 0.3% forecast. On a yearly basis, core PPI surged to 5.2% from 4% in March, also surpassing the 4.3% consensus. This marked the highest annual gain since March 2022. The final demand PPI, including all items, climbed 1.4% monthly and 4.4% yearly — the largest annual increase since February 2023.
Energy costs drove the surge. After a 10.1% spike in March, energy prices rose another 7.8% in April, as the Iran conflict continued to disrupt supply chains. Double-digit energy gains now threaten entire production and distribution networks. Service-sector inflation spread, with transportation and warehousing costs jumping from 1.8% in March to 5% in April. Surging logistics expenses (fuel, freight, storage) pushed the trade component up 2.7%. The “contagion effect” Fed members warned about is now materializing.
Rate-Cut Hopes Evaporate, Hikes Back on the Table
Consumer prices (CPI) were already elevated; the PPI explosion effectively pushes expectations for Federal Reserve rate cuts out by at least a year. Market consensus is shifting away from cuts toward the possibility of further hikes in the coming year. Bets on rate reductions previously priced for late 2025 are at risk of withdrawal. Kevin Warsh, set to take office on Friday and expected to restart quantitative easing (QE), now faces a blocked path for rate cuts due to strong employment data and rapidly rising inflation.
The stickiness of core inflation signals that price pressures will persist even if the Iran war ends. Core PPI has gradually risen from 2.7% in April 2025 to 4.4% in April 2026, moving further from the Fed's 2% target. This reversal poses an electoral risk for President Trump in November's elections.
Crypto Squeezed on Two Macro Fronts
Cryptocurrencies now face a dual macro squeeze. Extended high interest rates weigh on risk assets, while accelerating inflation undermines bitcoin’s narrative as an inflation hedge. Risk appetite across digital assets has contracted sharply. The KOSPI index fell 8.95% in a single day, triggering a circuit breaker, confirming broader market panic.