Bitcoin Falls 2% as Traders Price in 50% Chance of July Rate Hike
Major cryptocurrencies dropped more than 2% as a sudden surge in oil prices and hawkish Federal Reserve commentary drove a rapid repricing of near-term interest rate expectations.
Major cryptocurrencies fell more than 2% over the past 24 hours as money markets dramatically repriced the odds of a Federal Reserve interest rate hike this month. Traders now assign a roughly 50% probability to a July increase, a sharp jump from just 10% a few days ago, according to Bloomberg data.
The sudden hawkish shift follows remarks from Fed Governor Christopher Waller suggesting officials may need to raise rates to control price pressures. Those concerns were compounded by escalating U.S.-Iran tensions after President Donald Trump reinstated a blockade on Iranian vessels in the Strait of Hormuz and demanded a 20% reimbursement fee on other cargo. West Texas Intermediate crude futures surged to nearly $80 a barrel, up from $67 at the start of the month.
The repricing rippled through fixed-income markets, with the two-year U.S. Treasury yield climbing to 4.29%, a peak not seen since early last year. This segment of the yield curve is highly sensitive to shifts in near-term central bank policy, reflecting investor nerves over stubborn inflation.
Attention now shifts to Tuesday’s June consumer-price index report from the Labor Department, scheduled for 8:30 a.m. ET. Economists surveyed by Bloomberg expect headline CPI to fall below a 4% annual rate, which would mark the first declines in both headline and core inflation since January, following May's respective readings of 4.2% and 2.9%. However, the recent spike in energy costs risks rendering these figures backward-looking, potentially amplifying concerns about the central bank's trajectory if inflation proves stickier than anticipated.
Focus will then turn to congressional testimony from Fed Chair Kevin Warsh. Because Mr. Warsh typically offers limited forward guidance, traders will parse his remarks for any deviation. Analysts at ING noted that he could "if he chooses, emphasize the tameness of inflation expectations." They argued that Mr. Warsh "has enough ammunition here to ride the rate hike risk and instead hold pat," pointing out that the richness in the five-year curve suggests any hike would likely be reversed, leaving larger cuts on the table.
The recent digital asset selloff contrasts with improved underlying market liquidity last month. June marked the first increase in centralized exchange trading volumes in five months, with spot trading climbing 15.3% to $1.11 trillion and real-world asset perpetual volumes surging to a record $311 billion.
