Bitcoin rises above $64,000 after cooler June inflation report

Bitcoin moved above $64,000 Tuesday morning after U.S. inflation cooled more than expected, giving crypto investors a cleaner read on the Federal Reserve’s next move. Softer inflation can matter for risk assets like crypto because it reduces pressure on the Fed to raise interest rates, which can make cash and bonds more attractive relative to volatile assets.

The Consumer Price Index, or CPI, fell 0.4% in June from May, the U.S. Bureau of Labor Statistics said Tuesday. CPI tracks price changes across a broad basket of consumer goods and services. Economists had expected a smaller 0.1% decline, according to Decrypt.

Bitcoin was trading around $64,300 after the report, up 2.3% on the day, according to CoinGecko data cited by Decrypt. Ethereum rose more sharply, gaining 5.4% to about $1,890 over the same period.

Inflation cooled as energy prices fell

The June CPI drop was the largest one-month decline since April 2020, according to the inflation report cited by Decrypt. Falling energy costs drove the move lower, while food and shelter costs increased.

On a year-over-year basis, inflation slowed to 3.5%, marking the first annual decline in five months, according to the same report. Core inflation, a measure that excludes food and energy because those categories can swing sharply, came in at 2.6% for the 12 months through June. That was down from 2.9% the prior month.

Core inflation is closely watched because it can give policymakers a clearer view of underlying price pressure. Earlier in the year, the core measure had fallen to 2.5% in February before moving higher during the spring, according to Decrypt.

Why rates matter for crypto

The Fed raises interest rates when it wants to slow demand and contain inflation. Higher rates can weigh on speculative assets because investors can earn more from lower-risk options, while companies and consumers face higher borrowing costs.

Before the June CPI release, investors had been watching whether higher energy prices tied to Middle East tensions could push broader inflation higher. Decrypt reported that conflict involving the U.S. and Iran over the Strait of Hormuz continued to hang over markets, even after the encouraging inflation data.

Fabian Dori, chief investment officer at crypto bank Sygnum, told Decrypt that the latest government inflation figures were a constructive signal for digital assets. He said they suggested the spring’s energy-related price pressure was fading rather than spreading into the wider economy.

The market reaction kept one analyst’s quarter-end Bitcoin target of $100,000 within reach, according to Decrypt. That remains a price target, not a confirmed outcome, and crypto prices can change quickly around macroeconomic data, central bank decisions and geopolitical headlines.

This story draws on original reporting from Decrypt.