Bitcoin rose above $64,000 on Tuesday after a key US inflation gauge showed consumer prices fell more than expected in June, marking the largest monthly decline since April 2020. The data bolstered expectations that the Federal Reserve will hold interest rates steady at its upcoming meeting. Bitcoin traded around $64,300, up 2.3% on the day, while Ethereum climbed 5.4% to about $1,890, according to CoinGecko.
Inflation Data and Market Reaction
The US Bureau of Labor Statistics reported that the Consumer Price Index dropped 0.4% month-over-month in June, surpassing the 0.1% decline economists had forecast. Falling energy costs drove the decrease, offsetting rising food and shelter prices. On an annual basis, inflation slowed to 3.5%, the first decline in five months. Core inflation, which excludes volatile food and energy, stood at 2.6% year-over-year, down from 2.9% in May.
Fabian Dori, CIO at crypto bank Sygnum, called the data a hopeful sign for crypto, saying it was 'the first real indication that the energy-driven impulse from the spring is fading rather than broadening.' The cooler inflation reading reduced pressure on the Fed to raise rates, which typically weighs on risk assets like cryptocurrencies. Traders now see a high probability that the Fed will leave its target range at 3.5% to 3.75% later this month, though a September rate hike remains on the table.
Geopolitical Risks Loom
Despite the positive inflation news, escalating conflict between the US and Iran over the Strait of Hormuz continues to shadow markets. The US military announced it would reimpose a blockade on Iranian ports, following days of retaliatory strikes. Analysts warned that worsening tensions could disrupt global energy supplies and push inflation higher, potentially derailing the Fed's path to its 2% target. Matt Mena, senior crypto research strategist at 21Shares, noted that 'as long as tensions with Iran don't worsen, fundamentals and catalysts are starting to align for a $100k push by quarter-end' for Bitcoin.