Markets
Bitcoin (BTC) Price Surges After June CPI Turns Negative
Inflation continued to decline in June, according to the government’s consumer price index (CPI) report released Thursday morning, with the June rate coming in at a negative 0.1% compared with forecasts for a 0.1% increase and May’s reading of 0.0%.
On an annual basis, the CPI rose 3.0%, compared to forecasts of 3.1% and 3.3% in May.
The core CPI, which excludes food and energy costs, also came in better than expected, rising 0.1% in June, compared with 0.2% expected and 0.2% in May. Year-over-year, the core CPI rose 3.3%, compared with 3.4% expected and 3.4% in June.
The price of bitcoin (BTC) The price of a barrel jumped to $59,100 within minutes of the report’s release, an increase of nearly 2% over the past 24 hours.
A look at traditional markets shows that U.S. stock index futures are up, with the 10-year Treasury yield slipping nine basis points to 4.20%. Gold prices rose 1% to $2,404 an ounce.
Ahead of Thursday morning’s report, market participants were growing increasingly confident that the U.S. Federal Reserve would ultimately cut its benchmark federal funds rate at its mid-September meeting. CME FedWatch Tool The odds of that happening are over 70%, up from less than 50% just a month ago. It’s an idea that Fed Chairman Jerome Powell has already floated. took the trouble to neither confirm nor deny during two days of testimony before Congress earlier this week.
In his testimony, Powell acknowledged that the labor market was weakening and that the Fed was increasingly focused on downside risks to the economy. But he reiterated — as he and other Fed members have done for weeks, if not months — that the central bank wanted continued confirmation that inflation was returning to its 2% target before it could seriously consider cutting rates.
Bitcoin has been under considerable pressure in recent weeks, after hitting an all-time high above $73,500 at the end of the first quarter. The second quarter saw slowing inflows and even significant net outflows at times to U.S.-based spot ETFs. Then, in late June and early July, a surge in supply from government securities sales and the return of Mt. Gox tokens sent the price down to below $54,000 at one point, nearly 27% below that record high.
Bitcoin’s slide could be even more frustrating for bulls, given that other competing risk assets—notably U.S. stocks—have continued to climb throughout the summer. Just yesterday, the S&P 500 and Nasdaq completed their seventh straight day of gains, marking new records for each index.
Shortly after these latest inflation numbers, the probability of a rate cut in September rose to 87%, and the probability of a rate cut two or more times by the Fed’s November meeting climbed to nearly 50%. At the same time, the US dollar index fell by nearly 1%, a very significant move for this indicator. Whether this will become the catalyst for a further rise in bitcoin remains to be seen.