Bitcoin Rally Stalls as Traders Look Past Inflation Data
Bitcoin's overnight gains reversed as investors weighed persistent oil-driven inflation risks against favorable US consumer price data, signaling a more selective approach to macroeconomic signals.
Bitcoin gave back early gains on Wednesday, falling 0.5% since midnight despite holding a 3% increase over the past 24 hours. Ether mirrored this trajectory, dropping 0.5% overnight after climbing 4.7% across the previous day. The pullback arrived as markets absorbed the latest US consumer price index data.
The inflation print immediately cooled expectations for near-term monetary tightening. On Polymarket, the perceived probability of a Federal Reserve rate increase plunged from 34% to 6.7%, leaving bettors weighing a 93% chance rates will remain unchanged. CME FedWatch data indicated a similar consensus, pricing in just a 14.4% chance of a hike.
Rather than rallying on reduced rate-hike fears, digital assets traded sideways. “Crypto's reaction to the latest CPI report shows the market is becoming more selective in how it interprets macro signals,” said Markus Levin, co-founder of XYO. “While falling inflation reduces pressure on markets and improves the outlook for risk assets, traders are no longer assuming that every favourable inflation print will automatically lead to rate cuts or new all-time highs.”
That caution is rooted in persistent energy costs and central bank rhetoric. Brent crude trades above $85 a barrel, a level keeping inflation risks elevated after Iran threatened to block Middle East energy exports. Fed Chair Kevin Warsh reinforced the cautious stance, noting that one favorable inflation report is not enough to declare victory.
The European Central Bank has also effectively ruled out a July rate cut. “The focus has shifted toward whether inflation can continue to cool without showing signs of a rebound,” Levin said. Market participants are now awaiting US producer prices due later today and PCE data near the end of the month for further guidance.
The muted immediate price action contrasts with a broader recovery in market activity. Centralized exchange trading volumes rose in June for the first time in five months. Spot trading climbed 15.3% to $1.11 trillion, while perpetual volumes for real-world assets surged to a record $311 billion.
