Bitcoin nears $65,000 after U.S. inflation drops, significantly lowering Fed rate hike expectations and boosting risk assets.
Bitcoin's price surged to nearly $64,800, reflecting a 3.6% increase, following unexpectedly low U.S. inflation figures which significantly reduced market speculation regarding a Federal Reserve interest rate hike.
The Consumer Price Index (CPI) for June revealed headline inflation at 3.5%, down from 4.2%, while core inflation dropped to 2.6% from 2.9%. This broader decline suggests that the easing of inflation is not solely attributable to falling energy costs, undermining the rationale for a rate increase.
As a result of these figures, the probability of a rate hike plummeted from 43% to just 13%, leading to a decline in the two-year Treasury yield by six basis points. Bitcoin's trading volume surged to approximately $31 billion, and it has gained 3.3% over the week.
Ether also performed well, climbing to nearly $1,880, up 5.3% for the day. Other notable cryptocurrencies included Hyperliquid's HYPE, which rose 6.4%, XRP at $1.10 with a 3.7% increase, and Solana, which jumped 3.6% to $78.
Higher interest rates generally exert pressure on Bitcoin and similar risk assets since they make cash and Treasury bonds more attractive, reducing the appeal of non-yielding, volatile assets. Conversely, a drop in inflation lowers the likelihood of rate hikes, encouraging a shift back to riskier investments.
In related market trends, Brent crude oil prices increased by 1% to over $85 per barrel, marking three consecutive days of gains, influenced by geopolitical tensions in the Middle East. Additionally, equities mirrored this positive trend, with MSCI's Asia Pacific index rising 2.3%, its largest increase in a month, buoyed by technology stocks. South Korea's Kospi index surged 8.2%, reclaiming its position as the top-performing major benchmark this year.
Jeff Ko, chief analyst at CoinEx, noted that while recent data alleviates immediate downside risks for Bitcoin, it does not necessarily indicate a strong upward trajectory. He emphasized the importance of the upcoming September Federal Open Market Committee meeting and the sustainability of Bitcoin ETF inflows for future market movements.
