Bitcoin (BTC) failed to sustain its upward momentum on Friday despite a softer-than-expected U.S. Consumer Price Index (CPI) report, as markets focused on the Federal Reserve's cautious stance rather than immediate rate cut hopes.
CPI Miss Fails to Ignite Rally
Bitcoin rose about 3% in the 24 hours through Friday but slipped 0.5% after midnight, signaling fading bullish energy. Ethereum (ETH) similarly gained 4.7% in the same period before giving back 0.5%. While the lower CPI reading created a favorable environment for risk assets, traders did not interpret it as a clear signal for imminent rate cuts. Instead, the market reflected the Fed's view that one positive data point is insufficient to change policy direction.
Rate Expectations Shift Sharply
According to prediction market Polymarket, the probability of a rate hike plunged from 34% before the CPI release to 6.7% afterward. Conversely, the odds of a rate hold this month surged to 93%. The CME FedWatch Tool also priced in only a 14.4% chance of a hike based on 30-day federal funds futures. Markus Levin, co-founder of XYO, noted that the crypto market has become more selective in interpreting macro data. "Inflation cooling is positive, but it doesn't automatically lead to rate cuts or new all-time highs," he said.
Fed Caution and Oil Prices Add Pressure
Fed Governor Kevin Warsh maintained that a single inflation reading is unlikely to alter the policy trajectory, emphasizing that decisions depend on forthcoming data. Brent crude oil prices above $85 per barrel also fueled concerns about a potential inflation rebound. Additionally, the European Central Bank's July rate cut probability has effectively vanished. Market participants now look to the upcoming U.S. Producer Price Index (PPI) and month-end Personal Consumption Expenditures (PCE) data as key directional catalysts.
Bitcoin's Path Hinges on Sustained Disinflation
The market's focus has shifted from near-term rate decisions to whether inflation can stabilize consistently, especially amid rising energy costs. Geopolitical tensions in the Middle East add another layer of uncertainty, as supply disruptions could push oil prices higher, feeding back into inflation and rate expectations. Ultimately, Bitcoin's next move will likely be determined by a complex interplay of inflation, oil prices, and policy signals, with the market opting for confirmation over optimism.