Bitcoin rises on cooler CPI as Fed rate hike odds collapse

June's cooler-than-expected CPI print has slashed the odds of a July Fed rate hike, sending Bitcoin higher alongside risk assets.

Bitcoin rose after the June CPI report showed headline inflation falling 0.4%, the largest monthly drop since April 2020, crushing expectations for a 0.1% decline. The core CPI was unchanged on the month, pulling the annual rate down to 2.6% from 2.9%.

"The CPI data all but rules out a July rate hike," Seema Shah, chief global strategist at Principal Asset Management, said. "Beyond that, the outlook is less certain."

Fed funds futures priced the probability of a quarter-point hike at the July 29 meeting at just 10%, down from 45% at the start of the week, according to CME Group data. The two-year Treasury yield fell seven basis points to 4.19%, while the dollar index slipped toward a one-month low. Bitcoin's 24-hour trading volume climbed as traders increased long exposure across Binance and Deribit, per Coinglass data.

The question for crypto markets is whether this reprieve lasts. Energy prices tumbled 5.7% in June, but renewed U.S.-Iran tensions have already pushed crude back toward $80 a barrel, threatening to reverse the disinflation trend. Fed Chair Kevin Warsh, in his congressional testimony this week, flagged AI-related investment as a potential inflationary force, keeping the door open to tightening later this year.

Inflation Cools, but Structural Risks Remain

The improvement was broad-based beyond energy. Shelter prices rose just 0.1%, the smallest monthly increase since January 2021, while transportation services slipped 0.3% and medical care services eased 0.1%. Core goods prices fell 0.1%, with used car and truck prices declining 0.2% and apparel sliding 0.6%.

Yet the 12-month CPI inflation rate of 3.5% remains well above the Fed's 2% target. Ryan Kirkley, co-founder and CEO of Global Settlement Network, said markets are "moving too quickly to price in an easier policy path." Bitcoin and the broader crypto market continue to trade alongside traditional macro indicators, reinforcing how closely digital assets now follow the macro liquidity cycle, he added.

What to Watch Next

Bitcoin's next resistance sits at the June high, with support at the 50-day moving average. The Fed's next policy decision on July 29 will be the key catalyst, with markets now pricing even odds of a September move. Any escalation in Middle East tensions that pushes oil higher could quickly repricing rate expectations, tightening financial conditions and weighing on crypto risk appetite.

This article is for informational purposes only and does not constitute investment advice.