Bitcoin
Bitcoin (BTC) Price Surges After June CPI Turns Negative
Inflation continued to ease in June, according to the government’s Consumer Price Index (CPI) report on Thursday morning, with the June rate coming in at a negative 0.1% pace, versus forecasts for a 0.1% gain and May’s 0.0% reading.
On a year-on-year basis, the CPI was 3.0% higher than expectations of 3.1% and 3.3% in May.
Core CPI – which strips out food and energy costs – was also better than expected, rising 0.1% in June, versus expectations of 0.2% and 0.2% in May. Year-over-year Core CPI rose 3.3%, versus forecasts of 3.4% and 3.4% in June.
The price of bitcoin (BTC) jumped to $59,100 in the minutes following the report, an increase of nearly 2% in the past 24 hours.
A check of traditional markets finds U.S. stock index futures higher, with the 10-year Treasury yield down nine basis points to 4.20%. Gold is 1% higher at $2,404 an ounce.
Ahead of Thursday morning’s report, market participants were increasingly closing in on the idea that the U.S. Federal Reserve would finally cut its benchmark federal funds rate at its mid-September meeting. CME FedWatch Tool I put the odds of this happening at over 70% versus less than 50% just a month ago. It was a notion that Fed Chairman Jerome Powell made no effort to confirm or deny in two days of congressional testimony earlier this week.
In that testimony, Powell acknowledged a weakening labor market and that the Fed is becoming increasingly focused on downside risks to the economy. However, he reiterated — as he and other Fed officials have been doing for weeks, if not months — that the central bank wants continued confirmation that inflation is returning to its 2% target before rate cuts can be seriously considered.
Bitcoin has been under considerable pressure in recent weeks since hitting an all-time high above $73,500 at the end of Q1. Q2 saw a slowdown in inflows and even considerable net outflows for U.S.-based spot ETFs. Then, in late June and early July, a flood of supply from the sale of government holdings and the return of Mt. Gox tokens sent the price crashing below $54,000 at one point, nearly 27% below that record high.
Bitcoin’s decline may be even more frustrating for bulls given that other competing risk assets — namely U.S. stocks — have continued to climb higher over the summer. Just yesterday, the S&P 500 and Nasdaq completed their seventh consecutive day of advances, setting new records for each index.
On the heels of these latest inflation numbers, the odds of a September rate cut have risen to 87%, and the odds of two or more rate cuts by the Fed’s November meeting have jumped to nearly 50%. In parallel, the US dollar index has fallen by nearly 1%, a very significant move for this indicator. Whether this will become the catalyst for a new run higher for bitcoin remains to be seen.