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- Bitcoin recovered above $64,000 after July U.S. CPI data matched expectations.
- Fed rate hike expectations weakened, with prediction markets showing 54% odds of a hike this year.
- PPI is the next major test, potentially influencing Bitcoin’s next move and the Fed’s policy outlook.
Bitcoin recovered above $64,000 after the latest U.S. inflation report showed consumer prices rising in line with expectations, reducing immediate concerns that the Federal Reserve could resume raising interest rates. The data offered some relief to risk assets, although Bitcoin remained constrained by broader geopolitical and energy-market uncertainty.
July CPI Meets Expectations
Data from the U.S. Bureau of Labor Statistics showed headline CPI increased 3.4% year over year in July, matching forecasts. On a monthly basis, inflation rose 0.1%, also meeting expectations.
Core CPI, which excludes food and energy prices, climbed 2.5% from a year earlier and 0.2% month over month. Both readings were consistent with market expectations.
The softer inflation picture helped Bitcoin regain ground after falling to roughly $63,400 during the session. The cryptocurrency was trading near $64,100 following the release, according to TradingView data.
However, the rebound has not translated into a decisive breakout. Bitcoin remains in a relatively narrow range as investors assess the economic consequences of the ongoing U.S.-Iran conflict and uncertainty surrounding the Strait of Hormuz, particularly its potential effect on energy prices.
Fed Rate Hike Expectations Ease
The inflation figures also appear to have reduced expectations for another Federal Reserve rate increase. Prediction-market data puts the probability of rates remaining unchanged at the September FOMC meeting at 67%.
Expectations for a rate hike at some point this year have also declined. Polymarket data shows the probability at 54%, down from a recent peak of 60%. Those odds had climbed as high as 79% in July as tensions surrounding the U.S.-Iran conflict intensified.
The shift matters for Bitcoin because higher interest rates can make riskier assets less attractive by increasing the appeal of traditional fixed-income investments. A reduced likelihood of further tightening could therefore provide a more supportive backdrop for cryptocurrencies.
PPI Becomes the Next Test
Attention now turns to the upcoming U.S. producer price index report. A weaker-than-expected PPI reading could reinforce the view that inflationary pressure is easing and further reduce expectations for additional Fed tightening.
Still, the inflation debate remains unsettled. Fed officials Austan Goolsbee and Neel Kashkari have recently highlighted persistent inflation concerns, with Kashkari supporting higher rates as a tool to contain price pressures.
For Bitcoin, the latest CPI report provides short-term relief rather than a definitive change in the market outlook. Investors will likely watch the PPI data, labor-market conditions and geopolitical developments before deciding whether the move above $64,000 can develop into a sustained recovery.
Also Read: Strategy Breaks Its “Never Sell” Bitcoin Pledge — Here’s Why
July’s CPI data gave Bitcoin a boost by reinforcing expectations that the Fed may avoid another rate hike. Yet with PPI data ahead and geopolitical risks still influencing energy prices, the cryptocurrency market remains vulnerable to fresh volatility. The next inflation reading could be crucial in determining whether Bitcoin can build on its latest rebound.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
