Bitcoin briefly fell below $62,000 on Monday, touching $61,850, as a double blow from surging oil prices and hawkish Federal Reserve signals rattled risk assets. The 24-hour drop exceeded 3%, with Ethereum sliding to around $1,780 and other major cryptocurrencies like XRP, Solana, and Dogecoin also declining. The selloff came as U.S. stocks fell, with the Nasdaq losing about 1.55%.
Oil Prices Jump on Iran Sanctions and Strait of Hormuz Tensions
President Donald Trump announced the reinstatement of an 'Iran blockade,' restricting Iranian shipping and imposing a 20% fee on all cargo passing through the Strait of Hormuz to compensate for U.S. security costs. The U.S. military also resumed airstrikes on Iranian targets, heightening fears of disruptions to Middle East crude supplies. West Texas Intermediate crude surged 8.5% to near $77.50 a barrel, a one-month high.
Analysts warned that rising energy prices could reignite global inflation, reversing recent improvements in U.S. inflation data. Oil had previously fallen from above $90 to around $70, helping cool price pressures. Now, the rebound threatens to slow the disinflation trend and potentially force the Fed to tighten policy further.
Fed Official Signals Possible Rate Hike, Bond Yields Spike
Federal Reserve Governor Christopher Waller said Monday that if this week's core inflation data comes in higher than expected, the FOMC may need to consider further monetary tightening soon. He emphasized not repeating the 2021 mistake of reacting too slowly to inflation. The hawkish comments triggered a selloff in U.S. Treasuries, pushing the 2-year yield to 4.27% and the 10-year yield to 4.60%, reflecting higher rate expectations.
Higher yields and rising oil prices weighed on equities, with investors rotating into cash and bonds. Cryptocurrencies, lacking fixed income, faced particular pressure. Market participants noted that when bond yields climb and rate hike expectations rise, crypto assets tend to suffer.
All Eyes on June CPI as Key Fed Guide
Attention now turns to Tuesday's U.S. June Consumer Price Index report. Economists forecast headline CPI month-over-month to drop from 0.5% to -0.1% and the annual rate to ease from 4.2% to 3.8%. Core CPI is expected to remain at 0.2% month-over-month and 2.9% year-over-year. Given the economy's resilience, the inflation data will be crucial for the Fed's next moves. A hotter-than-expected core reading could boost bets on a July or September rate hike, while a cooler print might relieve recent market stress.