Coinbase stock declined 1.24% to $172.30 on Thursday following stronger-than-expected producer inflation data that intensified expectations for continued Federal Reserve rate hikes. The crypto market contracted 2.32% to $2.62 trillion as investors reduced risk exposure.
The August Producer Price Index rose 0.4% month-over-month and 5.4% year-over-year, exceeding the 5.3% consensus estimate. The elevated annual reading contradicts expectations that inflation pressures are gradually subsiding, with core pipeline prices remaining elevated.
Futures markets reflected the inflation concerns by raising the implied probability of a September rate increase to 71%, up from 64% previously. Markets now assign a 62% chance to a rate hike at next week's Federal Open Market Committee meeting.
Fed Chair Kevin Warsh faces mounting evidence of inflation alongside a robust employment picture. Initial jobless claims stood at 206,000 with 1.774 million ongoing claims, indicating limited layoffs. Oil prices also moved above $100 per barrel, adding another inflationary pressure ahead of the Fed's two-day policy discussion.
Bitcoin fell below $77,000, down approximately $1,200, while Ethereum traded below $2,500. Wall Street Journal journalist Nick Timiraos noted that Friday's consumer inflation report would be significant for Fed decision-making.
Coinbase's weakness reflects dual headwinds: declining cryptocurrency prices and reduced retail trading activity amid rate hike expectations. Near-term recovery prospects depend on lower-than-expected CPI figures, moderated rate expectations, or a rebound in the cryptocurrency market.
