Bitcoin ticked above $64,000 Tuesday morning, after a widely watched inflation gauge showed consumer prices cooling more than expected in June—bolstering expectations that the Federal Reserve will leave interest rates untouched at the conclusion of its next policy meeting.
The largest one-month decrease in consumer prices since April 2020 was prompted by falling energy costs, the inflation snapshot indicated, offsetting a rise in food and shelter costs. On an annual basis, inflation slowed to 3.5%, decreasing for the first time in five months.
Fabian Dori, CIO at crypto bank Sygnum, told Decrypt that the government’s latest inflation numbers marked a hopeful sign for crypto, representing “the first real indication that the energy-driven impulse from the spring is fading rather than broadening.”
Cooler than expectedAs conflict in the Middle East squeezed global energy supplies, investors braced for tighter monetary conditions, expecting the U.S. central bank to raise interest rates in an attempt to prevent associated price pressures from spreading to the broader economy.
So-called core inflation, which strips out volatile food and energy costs, clocked in at 2.6% in the 12 months through June, down from 2.9% the previous month. Earlier this year, the annual core measure had dipped to 2.5% in February before ticking back up in the spring.
Higher interest rates typically weigh on risk assets like stocks and crypto as the risk-free payouts on government bonds become relatively attractive. Conversely, expectations of accommodative monetary policy tend to buoy digital assets.
As the war between the U.S., Israel, and Iran has clouded the Fed’s path to reining in inflation to its 2% goal, analysts—including Matt Mena, senior crypto research strategist at exchange-traded fund issuer 21Shares—have said that the conflict could shape crypto prices.
“As long as tensions with Iran don't worsen, fundamentals and catalysts are starting to align for a $100k push by quarter-end,” he told Decrypt.
