Bitcoin Drops Below $77,000: Why Expectations for a Fed Rate Hike Strengthened?

Higher-than-expected producer inflation pushed Bitcoin below $77,000 while strengthening market pricing for a Federal Reserve interest rate hike.

August producer prices rising by 5.4% and exceeding the 5.1% expectation shifted investor outlook for next week’s Federal Reserve meeting. Bitcoin fell nearly 2% in 24 hours, dropping below $77,000, while rising bond yields expanded the sell-off in crypto assets.

According to CoinDesk data, the CoinDesk 20 index fell by approximately 3%. Within the CoinDesk 100, 95 assets ended the day with losses. The 30-year U.S. Treasury bond yield climbed to its highest level in 19 years, while the 10-year yield approached 5% and the two-year yield rose above 4.5%.

Sharp losses seen in Zcash and altcoins

Zcash (ZEC) dropped about 12% to around $1,134. Despite this, the cryptocurrency is up approximately 34% weekly and about 145% monthly. Hyperliquid (HYPE) fell nearly 7%, dropping below $79, with its weekly loss reaching approximately 10%.

Dogecoin (DOGE) fell about 6% to 8 cents, while XRP dropped approximately 3% to $1.34. Solana (SOL) lost more than 3% in value, pulling back below $100. Ether remained around the $2,445 level with a roughly 2% decline, and BNB slipped just over 1%. Tron (TRX) traded flat, becoming the only major cryptocurrency to avoid losses.

Bitget analyst Lewis Huang identified $76,270 as a key support level for Bitcoin. Bitcoin is currently trading less than $800 above this level.

Interest rate futures are pricing in an approximately 70% probability of a rate hike at the Sept. 15-16 Fed meeting. This rate was around 50% two weeks ago. In the upcoming U.S. CPI data, headline inflation is expected at 3.4% and core inflation at 2.4%.

Alongside rising bond yields, U.S. spot Bitcoin ETFs saw $120 million in outflows on Wednesday. Ether, XRP, and Solana ETFs recorded net inflows on the same day. The price per barrel of Brent crude oil also rose more than 6% to over $107.