Hot PPI Data Hits Bitcoin and Crypto Assets Hard

Hi! In today’s edition:

• 📊 Hot inflation data cools crypto prices

• 🛑 Bessent won’t buy BTC

• 💼 Citi could guard stablecoins

• 🚀 DeFi tokens riding the stablecoin wave

• 🎙️ ETH rally: overheated or just beginning?

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Crypto Drops as Hot PPI Data Rattles Markets

A surprise spike in U.S. wholesale inflation sent crypto prices sharply lower Thursday, one day after bitcoin hit a record high. The Producer Price Index rose 0.9% in July — the largest monthly gain in over three years — far above economist forecasts of 0.2%. The annual rate climbed to 3.3%, fueling expectations that the Federal Reserve may keep interest rates higher for longer.

Fed Chair Jerome Powell is in a tough spot now.

On Polymarket, the probability of no rate change in September rose from 12% to 20%, while odds of a 25-basis-point cut fell from 80% to 75%. Just 4.1% of traders now see a 50-basis-point cut as likely.

Bitcoin slid to an intraday low of $117,254, while ether fell to $4,461 before both partially recovered. As of 6 am ET, Bitcoin traded at $118,700 and ETH at $4,620, still below pre-report levels of $121,000 and $4,700.

ETF investors appeared to view the drop as a buying opportunity. U.S. spot bitcoin ETFs recorded $230.8 million in net inflows Thursday, while ethereum ETFs saw $639.6 million, marking continued institutional interest despite the inflation surprise.

Bessent Clarifies U.S. Bitcoin Reserve Plans

U.S. Treasury Secretary Scott Bessent said on Fox Business that the government would not purchase bitcoin to grow its new Strategic Bitcoin Reserve, which currently holds an estimated $15–20 billion in assets seized by law enforcement. 

Instead, he said the reserve would be expanded through future confiscations, ending the practice of selling such holdings.

Later on Thursday, Bessent posted on X that Treasury remains “committed to exploring budget-neutral pathways to acquire more bitcoin.”

The reserve, established by a March executive order, aims to position the United States as a global leader in digital asset reserves, a strategy closely watched by both industry and foreign governments.

Citigroup Explores Stablecoin and Crypto ETF Custody Services

Citigroup is considering offering custody and payment services for digital assets, starting with the U.S. Treasuries and cash reserves that back regulated stablecoins. 

Biswarup Chatterjee, global head of partnerships and innovation for Citi’s services division, told Reuters the bank is also evaluating custody solutions for assets tied to crypto exchange-traded products, including bitcoin and ether ETFs.

“There needs to be custody of the equivalent amount of digital currency to support these ETFs,” Chatterjee said, noting that Coinbase currently dominates the sector.

The move follows recent U.S. legislation requiring stablecoin issuers to hold high-quality reserves, opening opportunities for traditional banks to serve as custodians. Citi is also exploring stablecoin-based payments and conversion services for faster transactions.

DeFi Tokens Surge — But These Hidden Gems Could Shine Next

DeFi tokens are having a moment. Aside from being a high-beta play on ether, which has surged 70% over the past three months, expectations are growing for a big influx of capital into the sector on the back of the GENIUS Act giving stablecoins the regulatory all-clear.

As of this writing, over $156 billion in assets is locked in various DeFi protocols like AAVE, Compound, Uniswap, and others. But with stablecoins now set to surge — Treasury Secretary Scott Bessent says that they can grow from their current base of $270 billion to over $3 trillion by 2030 — industry analysts expect usage of these protocols to climb as token holders seek passive yield on their assets.

But beyond the blue chips, which under-the-radar DeFi tokens could be the next big winners?

ETH Is Soaring and Close to ATHs. How Long Will the Rally Continue?

ETH has surged a lot recently, and it’s nearing all-time highs—but what’s driving the rally?

In this Bits + Bips segment, Ram Ahluwalia, Alex Kruger, Steve Ehrlich and guest Sid Powell unpack what’s really happening under the hood: from on-chain credit innovation to massive flows from new treasury vehicles like BitMine and SBET.

They also break down:

• Why Ethereum is benefiting most from regulatory clarity

• Why BitMine’s mNAV is surging while SBET lags

• Whether this rally is overextended or just getting started

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• 📨 Over 80 crypto and fintech executives urged President Trump to block new bank data access fees, warning they could cripple U.S. digital asset innovation and cut consumers off from cheaper financial products.

• ⏳ The U.S. SEC pushed its decision on Bitwise and 21Shares’ proposed Solana ETFs to October 16, continuing its pattern of delaying rulings on crypto fund applications while reviewing multiple SOL-focused filings.

• 📉 Lido’s share of Ethereum staking fell to a record-low 24.4% as rivals like Figment gained ground, easing fears of centralization and signaling a more competitive, diversified staking landscape.

• 🔑 Gemini launched a self-custody wallet with passkey login and an onchain dashboard for trading, DeFi access, and cross-chain swaps, while covering gas fees and offering ENS names to attract early users.

• 🔒 Hong Kong’s securities regulator imposed strict new custody rules for licensed crypto firms, including banning smart contracts in cold wallets and mandating heavy offline security and whitelisted withdrawals.

• 💳 Mesh, the crypto payments firm powering PayPal’s “Pay with Crypto,” raised fresh capital from backers like PayPal Ventures and Coinbase Ventures, pushing total funding past $130 million to expand its multi-asset payment infrastructure.

• 🏥 David Bailey’s Bitcoin company Nakamoto completed its merger with healthcare firm KindlyMD to form a Nasdaq-listed Bitcoin treasury vehicle aiming to accumulate 1 million BTC despite currently holding just 21.

1. Human Rights Foundation: Financial Freedom Report 

2. Four Things That the Crypto Market Hasn’t Priced In by Matt Hougan, CIO of Bitwise