Crypto markets remain calm as US CPI drops more than anticipated, defying inflation expectations.
In a surprising turn of events, the US inflation rate, as indicated by the Consumer Price Index (CPI), fell to 3.0% year-on-year (YoY) in June, a significant decrease from 4.0% in May, according to the Bureau of Labor Statistics. This surpassed market expectations, which had predicted a modest drop to 3.1%.
In the wake of this announcement, Bitcoin (BTC), the world's largest cryptocurrency by market capitalization, demonstrated remarkable resilience. The digital asset's price movements remained relatively stable, peaking at $30,900 before retracting slightly to just below $30,260.
Markets Anticipate Rate Hike Despite Lower Inflation
The core CPI, which excludes volatile components such as food and energy prices, also saw a notable decline from 5.3% to 4.8%, defying expectations of a 5.0% rate. This marks the lowest level for the core inflation rate since October 2021, a significant shift after consistently exceeding 5% throughout the year.
Despite the unexpected dip in inflation, markets and the Federal Reserve are still bracing for another rate hike. The CME's FedWatch tool indicates a 91.1% probability of this outcome during the Federal Open Market Committee (FOMC) meeting slated for later this month.
While Bitcoin's price remained relatively unmoved, traditional financial markets responded more noticeably to the inflation news. The US 10-year Treasury yield fell 6 basis points to 3.91%, and the 2-year yield dropped 14 basis points to 4.73%. The dollar index also decreased by 0.5%, while stock index futures rose 0.8% on the previous trading day.
This muted reaction from Bitcoin amidst significant economic news highlights the cryptocurrency's growing maturity and resilience in the face of macroeconomic shifts. As the crypto market continues to evolve, it will be interesting to observe how Bitcoin and other digital assets respond to future economic developments.
Stay tuned for more updates on the dynamic interplay between the crypto market and global economic indicators.