Yesterday’s CPI release sent ripples through both traditional and crypto markets, catching many traders off guard. While equities managed to hold their ground despite hotter-than-expected inflation data, crypto saw sharp swings, with Bitcoin pulling back before partially recovering. 

With inflation pressures now back in focus and bond yields spiking, traders are weighing whether the Fed will be forced into a more hawkish stance, potentially reshaping risk sentiment heading into the weekend. This mix of macro uncertainty and altcoin resilience could create both opportunities and traps over the next 72 hours.

Here’s what we’ll cover today:

Let’s dive in 👇

📢 Holiday Break

We’ll be taking a one-week summer holiday break, there will be no market reports from Monday, August 18th to Friday, August 22nd.

Reports resume as usual on Monday, August 25th.

The underlying PPI data reveals a concerning trend that extends well beyond a single month's reading. Final demand producer prices rose 3.3% year-over-year, with services advancing 1.1% and goods increasing 0.7% in July alone. What makes this particularly troubling is that prices paid to producers rose by the most in three years, suggesting that inflationary pressures are building throughout the supply chain.

The bond market's response to the July PPI release was swift and decisive. Two-year Treasury yields surged from around 3.66% to 3.74% in a matter of hours following the 8:30 AM data release. The Producer Price Index jumped 0.9% month-over-month against expectations of just 0.2%, catching markets completely off guard. This dramatic yield spike reflects growing concerns that inflationary pressures are far from contained, potentially forcing the Federal Reserve to maintain its hawkish stance longer than previously anticipated.

Perhaps most remarkably, the S&P 500 managed to extend its record highs despite the concerning inflation data. The index showed impressive resilience, with daily returns oscillating between modest gains and losses but ultimately maintaining its upward trajectory. This disconnect between rising yields and advancing stocks suggests that markets are either betting on the Fed's continued restraint or that corporate earnings growth can withstand higher borrowing costs.

The fact that equities held their ground while bonds sold off sharply indicates a complex market dynamic where growth expectations might be offsetting inflation concerns, at least for now. We maintain our bullish outlook on cryptocurrencies as these macro dynamics continue to unfold.

Bitcoin sold off sharply following yesterday’s PPI data release and dropped back inside our range between $116,900 and $118,400. Price then trended higher again and managed to close the day above our upper range of $118,400, from where it has so far shown a bullish reaction, currently trading at $119,000.

Notably, total Bitcoin spot ETF flows remained positive throughout the entire week, with no days of outflows so far, signaling demand and serving as a sign of strength as we head into the weekend.