Getting 401 "incorrect_password" when making authenticated requests in Wordpress using Application Passwords

Question

I have an endpoint that receives a url, username, application password and blogPost. I then base64 encode the username and password, attach the blogPost data in the body of the request and send it off. The request makes it to the other server, but I get a 401 "incorrect_password" response:

{
    "code": "incorrect_password",
    "message": "The provided password is an invalid application password.",
    "data": {
        "status": 401
    }
}

I have tested this with Postman and get the exact same response. I have also attempted authenticating on 2 different sites, with all pluggins disabled. Both site are host on Kinsta using nginx.

My endpoint code:

$auth = base64_encode($cc_agent_un.':'.$cc_agent_ap);
            $wp_request_headers = array(
              'Authorization' => 'Basic '.$auth,
              'Content-Type' => 'application/json'
            );
            $body = array(
              'title' => $blogTitle,
              'content' => $blogContent,
              'status' => 'publish'
            );
            $result = wp_remote_post($url, [
              'headers' => $wp_request_headers,
              'body' => $body
            ]);

            // if request is successful, return success message. If not, return error message from wp_remote_post
            if (is_wp_error($result)) {
              return [
                'status' => 'Blog Post Failed: '
              ];
            } else {
              return [
                'status' => 'Blog Has Been Successfully Posted'
              ];
            }