Bitcoin surged above $65,000 on Tuesday after U.S. inflation data showed consumer prices fell 0.4% in June, the largest monthly decline since April 2020, according to the Bureau of Labor Statistics. The cryptocurrency traded as high as $65,100, up more than 4%, while ether outperformed with a nearly 7% gain to around $1,895.
Inflation Cools More Than Expected
The Consumer Price Index drop exceeded economists' expectations of a 0.2% decline. On an annual basis, inflation slowed to 3.5% from 4.2%, marking the first cooldown after May's three-year high. Falling energy costs drove the decline, with gasoline prices dropping over 9% in June, offsetting increases in food and shelter.
Easing Rate Hike Fears
The cooler inflation data eased fears that the Federal Reserve might raise interest rates this month, a scenario that typically pressures risk assets like bitcoin. Earlier this year, energy costs tied to tensions between the U.S. and Iran had pushed prices higher, feeding expectations of a hawkish Fed. Traders now see the Fed likely holding rates in the 3.5% to 3.75% range at its July meeting, according to CME FedWatch, though many still expect a 25-basis-point hike in September.
Geopolitical Context
Despite the positive inflation news, geopolitical risks remain. The U.S. military said Tuesday it was preparing to reimpose a blockade on Iranian ports after recent retaliatory strikes near the Strait of Hormuz. The Warsh Fed had signaled a more hawkish path last month, keeping markets on edge.