Fed Policy and US PPI: Why the Crypto Market Isn't "Afraid" of Bad Data

Recently, macroeconomic data from the U.S. has shown a complex picture of inflation pressures and new policy signals. Specifically, last month’s U.S. Producer Price Index (PPI) rose more sharply than expected, causing concern among many investors. However, the cryptocurrency market did not react as negatively as anticipated. This reflects a significant shift: large capital flows are moving away from focusing on short-term economic figures toward long-term policy expectations.

Inflation Pressure from U.S. PPI Still Hot

The newly released U.S. PPI data shows a month-over-month increase of 0.5%, significantly higher than the 0.2% in the previous month. Year-over-year, the PPI remains at 3%, while the Core PPI (excluding volatile factors) also hovers around 3% y/y. These numbers clearly indicate that cost pressures from producers are not showing significant signs of easing.

On the surface, this is not good news for risk assets. A high PPI is often interpreted as persistent input inflation, which could make it difficult for the Federal Reserve (Fed) to cut interest rates as quickly as the market previously expected. Under normal circumstances, such a report would shock assets sensitive to monetary policy, including cryptocurrencies.

Kevin Warsh: New Fed Leader Has a Different Attitude Toward Bitcoin

But the real story begins with a comment from Michael Saylor, Chairman of MicroStrategy. He said: “Kevin Warsh is about to become the first Fed Chair not to ‘oppose’ Bitcoin.” While not a definitive prediction, this statement reflects a much more important reality: the political landscape surrounding Fed leadership is changing rapidly.

Kevin Warsh, a name heavily favored in prediction markets for the next Fed Chair, is not the type of leader “satisfied” with inflation. However, he also does not belong to those who actively oppose Bitcoin or cryptocurrencies on ideological grounds. For a significant segment of the market, just having a Fed Chair who is not hostile toward Bitcoin is already a major step forward compared to the past.

Large Capital Flows Toward Long-Term Policy, Ignoring Short-Term Shocks

The real insight here is: major investors are temporarily ignoring U.S. PPI to look further ahead. Inflation data might delay expectations of rate cuts by a few months, but if the market believes that the internal power structure of the Fed is about to change significantly, the psychological impact can be even stronger than a few month-over-month figures in the PPI report.

This clearly indicates the current phase of the economic cycle: we are in a stage of pricing in future policy expectations. The market is beginning to ask: who will hold decision-making power in the next 1-2 years, and how do they view cryptocurrencies? In this context, high PPI becomes a short-term obstacle but not enough to reverse the larger story about the future of monetary policy and digital assets.

Lesson for Investors: Observe Without Always Following Headlines

For those monitoring the market, this remains a period to pay closer attention to actual market reactions rather than chasing headline news. A simple rule: when bad data doesn’t cause prices to collapse, it’s often because big money is looking elsewhere. And that “elsewhere” is who will be the next Fed Chair, not just minor monthly fluctuations in the U.S. PPI.

As long-term policy factors become more important than short-term economic data, investment decisions will also shift accordingly. That’s why Bitcoin and the entire crypto market did not crash when PPI rose—because the context has changed, and the bigger story is still unfolding.