Bitcoin drops 3% after touching record highs as crypto rolls over

Bitcoin (BTC-USD) retreated more than 3% from its record highs on Thursday after hotter than expected inflation soured expectations of a large rate cut in September and after Treasury Secretary Scott Bessent signaled the US won't be purchasing or selling its bitcoin reserve.

On Wednesday, bitcoin touched an all-time high past $123,500 per token in anticipation of looser monetary policy and corporate purchases. Crypto rolled over after July's producer price index came in much higher than expected.

During an interview with Fox Business this morning, Bessent said US reserves of bitcoin amount to around $15 billion or $20 billion at today's prices.

"We've also started to get into the 21st century — a bitcoin strategic reserve. We're not going to be buying that, but we are going to use confiscated assets and continue to build that up. We're going to stop selling that," he said.

Expectations of Fed rate cuts, coupled with heavy purchases from corporate treasurys, have driven up the price of the asset this year.

The cryptocurrency has gained 25% year to date and has rallied roughly 57% since the April lows.

CCC - CoinMarketCap • USD # (BTC-USD)

Follow     View Quote Details    117,875.00  -3,883.82  (-3.19%)   As of 5:23:00 PM UTC. Market Open.        BTC-USD ETH-USD   Advanced Chart    Inflows into spot exchange-traded funds, along with purchases from public companies copying the blueprint of software firm-turned-bitcoin juggernaut Strategy (MSTR) by adding bitcoin to their balance sheets, have been key drivers of this year’s token rally.

Strategists also point to the Trump administration’s pro-crypto stance as a major catalyst.

"The administration is pushing crypto. They are pushing bitcoin. Bitcoin is the lead dog in the crypto market," Tom Essaye, founder of Sevens Report Research, told Yahoo Finance earlier this week.

"So is it short-term a little frothy? Sure," he added. "But longer term, there are some fundamental changes here that I think are bullish for it, and we'll send it much higher in the future."

Last week, President Trump issued an executive order directing the Labor Department to explore allowing 401(k) plans to hold cryptocurrencies and other alternative assets, a move that could significantly expand retail access to crypto.

The price surge also comes as US equities have notched all-time records on expectations the Federal Reserve will cut interest rates in September, and that Trump’s next Fed chair pick will likely favor looser monetary policy.

Meanwhile, ethereum (ETH-USD) prices also retreated more than 3% on Thursday after rising to near record levels as Wall Street grows increasingly bullish on the world's second-largest cryptocurrency by market cap.

Story ContinuesCompanies have been adding ether to their balance sheets as a way to gain exposure to the tech infrastructure behind decentralized finance and digital assets, such as stablecoins.

Three physical replicas of Ethereum coins lie on a wooden table. (Fernando Gutierrez-Juarez/picture alliance via Getty Images) · picture alliance via Getty Images This week, Bitmine Immersion Technologies (BMNR), an ethereum treasury company, announced plans to sell up to another $20 billion worth of stock to boost its holdings of the cryptocurrency.

"We have stated multiple times we believe Ethereum is the biggest macro trade over the next 10-15 years," Fundstrat head of research Tom Lee, who also serves as chairman of Bitmine, wrote in a note Wednesday.

Lee noted the majority of Wall Street crypto projects and stablecoins, or digital tokens backed by assets like the US dollar, are being built on the ethereum infrastructure.

Ether, the native token of ethereum, is up more than 50% since the GENIUS Act legislation, which creates guardrails for the stablecoin industry, was passed last month.

Additionally, the Securities and Exchange Commission's recent "Project Crypto" announcement, an initiative to modernize the agency and establish clear regulations around the digital asset industry, has also fueled the rally in ethereum.

Fundstrat sees ETH hitting prices moving as high as $15,000 by year-end.

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