Bitcoin rallies to $64,000 as cooling US inflation dents rate hike bets
A sharper-than-expected drop in U.S. consumer prices pushed Bitcoin above $64,000 on Tuesday, though escalating Middle Eastern tensions keep a cloud over the market's rate-cut optimism.
Bitcoin climbed past $64,000 on Tuesday morning after a larger-than-anticipated drop in U.S. consumer prices tempered expectations for imminent interest rate hikes. The flagship cryptocurrency gained 2.3% to trade around $64,300, data from CoinGecko showed.
The U.S. Consumer Price Index fell 0.4% month-over-month in June, drastically outpacing economists' forecasts of a 0.1% decline. This marked the steepest monthly decrease since April 2020, driven primarily by retreating energy costs that offset rising food and shelter prices.
Traders responded by pricing in a high probability that the Federal Reserve will keep rates in the 3.5% to 3.75% target range at its upcoming meeting, according to CME FedWatch. However, markets still anticipate a 25-basis-point increase in September, leaving the central bank's path tightly constrained.
On an annual basis, inflation slowed to 3.5%, snapping a five-month streak of increases. Core inflation, which excludes volatile food and energy categories, fell to 2.6% over the 12 months through June, down from 2.9% the prior month.
Fabian Dori, chief investment officer at crypto bank Sygnum, noted that the data provides relief for digital asset investors. He characterized the report as "the first real indication that the energy-driven impulse from the spring is fading rather than broadening."
While Bitcoin lagged slightly behind broader risk assets, Ethereum posted a more pronounced rally. The second-largest cryptocurrency jumped 5.4% to trade near $1,890.
Geopolitical headwinds
Despite the bullish inflation print, the crypto market remains shadowed by escalating military conflict in the Middle East. Rising tensions between the U.S., Israel, and Iran over control of the Strait of Hormuz threaten to disrupt global energy supplies and complicate the Fed's efforts to reach its 2% inflation target.
The U.S. military announced it was preparing to reimpose a blockade on Iranian ports at 4 p.m. Eastern Time on Tuesday. This followed days of retaliatory strikes centered on the vital oil shipping chokepoint.
The dual dynamics of cooling domestic inflation and mounting international risk have left analysts forecasting a volatile path forward. Matt Mena, senior crypto research strategist at 21Shares, argued that the baseline remains constructive: "As long as tensions with Iran don't worsen, fundamentals and catalysts are starting to align for a $100k push by quarter-end."
