Bitcoin rises after June inflation cools more than expected

Crypto prices climbed after a cooler-than-expected U.S. inflation report gave investors a reason to rethink interest-rate pressure on risk assets. For everyday investors, the move matters because Bitcoin and Ether often react quickly when markets see lower odds of tighter Federal Reserve policy.

The Consumer Price Index, a widely followed measure of consumer inflation, fell 0.4% in June from the prior month, the U.S. Bureau of Labor Statistics said Tuesday, according to Decrypt. That was the largest monthly drop since April 2020. The annual inflation rate declined to 3.5% from 4.2% in May, below the 3.8% economists had expected, while core CPI was flat on the month and cooled to 2.6%.

Bitcoin moved from around $62,000 to as high as $64,900 after the report, Decrypt reported. Its market data later showed Bitcoin around $64,800. Ether also rallied, with Decrypt reporting a 7% jump to $1,884 after the CPI release, while later price data showed ETH near $1,921.

The move also hit traders positioned for prices to fall. Decrypt said roughly $300 million in short positions were liquidated, meaning leveraged bearish trades were forced to close as prices moved against them.

Why CPI moved crypto

Inflation data feeds directly into expectations for Federal Reserve policy. If inflation cools, investors may see less need for the Fed to raise rates. Higher rates tend to weigh on speculative assets because cash and bonds become more attractive, while borrowing gets more expensive. Lower rate pressure can have the opposite effect, although crypto prices can move for many other reasons as well.

Decrypt noted that the CPI report was the last major inflation reading before the Fed’s July 28-29 policy meeting. The report weakened the case for another near-term rate increase, according to the newsletter, after rate-hike concerns had weighed on the market during the summer.

Prediction market Polymarket showed the odds of a July rate cut falling to 6% from 35% after the CPI report and comments from Fed Chair Kevin Warsh, according to Decrypt. The same report said the odds of at least one rate hike by year-end remained around 80%, down from 90%.

Warsh keeps focus on inflation

Warsh testified to Congress within hours of the CPI release in his first appearance since taking over from Jerome Powell, according to Decrypt. Wall Street Journal reporter Nick Timiraos posted on X that Warsh said the Fed has “no tolerance for persistently elevated inflation.”

Warsh also told lawmakers that if the Fed gets policy right, the inflation surge of the past five years “will be a thing of the past,” according to the post cited by Decrypt.

Decrypt said Warsh also emphasized business investment tied to artificial intelligence. He described business investment as a standout feature of the economy and said what is now called AI investment will eventually be viewed more broadly as investment, according to the newsletter.

Other crypto moves

Beyond Bitcoin and Ether, Decrypt’s morning rundown said major crypto assets were up 3% to 6% after the CPI print. It also reported that HYPE rose 7% to $68 as the SEC Crypto Task Force met with the HPC team.

The newsletter said Mizuho downgraded Circle with a $50 price target, citing OpenUSD competition. It also noted that Pump.fun faced its first major token unlock, with $86 million in PUMP entering the market, while PUMP was up 15%. Decrypt also pointed to a rotation on Robinhood Chain from meme tokens into protocols.

This story draws on original reporting from Decrypt.