Bitcoin Selloff Risk Returns as US PPI Hits 5.4% and Rate Hike Odds Near 60%

US producer inflation data raised concerns of another Federal Reserve rate hike. The August Producer Price Index increased 5.4% year over year, heightening expectations of a 25-basis-point rise at the upcoming meeting. Bitcoin experienced a selloff, falling below $77,000 as the 10-year Treasury yield surged to 4.96%, nearing the important 5% threshold.

The 30-year yield also hit its highest level since 2007. Despite larger Treasury buybacks, yields persisted, indicating inflation, oil prices, and fiscal concerns outweighed efforts to ease long-term borrowing costs. The PPI report led traders to raise the probability of a 25-basis-point increase at the September meeting to around 70%, from approximately 62% before the release.

Analysts noted that higher interest rates and rising Treasury yields make government debt more attractive while tightening financial conditions for risk assets like Bitcoin. The bond market's reaction indicated that larger official buyers, such as the U.S. Treasury, were struggling to overcome the factors driving investors away from longer-duration government debt.