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Bitcoin slips as traders lift July Fed rate hike bets ahead of Inflation report
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- DeepHorus
Bitcoin and other major cryptocurrencies slipped on Monday as traders sharply increased their bets on a Federal Reserve interest rate hike as soon as July, just ahead of key U.S. inflation data and congressional testimony from Fed Chair Kevin Warsh. The price of Bitcoin fell over 2% in the past 24 hours, while other leading digital assets, including Ethereum and Ripple, also recorded similar declines. The selloff reflects growing unease that the central bank may tighten monetary policy sooner than previously expected, a move that typically weighs on risk-on assets like cryptocurrencies.
The shift in market expectations comes after Fed Governor Christopher Waller indicated that officials may need to raise rates further to bring price pressures under control. According to Bloomberg data, money markets now assign roughly a 50% probability to a rate hike this month, up sharply from about 10% just days ago. This hawkish repricing rippled through fixed-income markets, pushing the two-year U.S. Treasury yield to 4.29%, its highest level since early last year.
The renewed bets on a rate hike are partly fueled by escalating U.S.-Iran tensions and a sharp climb in oil prices, which could exacerbate inflationary pressures. President Donald Trump reinstated a U.S. blockade of Iranian vessels transiting the Strait of Hormuz and demanded a 20% reimbursement fee on other cargo through the waterway. West Texas Intermediate crude futures have surged to nearly $80 a barrel from $67 at the start of the month, stoking fresh inflation concerns.
Investors are now focused on Tuesday’s consumer-price index report from the Labor Department, which is expected to show headline CPI falling below a 4% annual rate. This would mark the first decline in both headline and core inflation since January, following May’s readings of 4.2% and 2.9%, respectively. However, analysts caution that even if the data meets expectations, it could be viewed as backward-looking given the recent oil price spike, potentially amplifying concerns about the Fed’s policy path.
Attention will then turn to Fed Chair Kevin Warsh’s congressional testimony, where investors will look for any signals on future rate moves. According to analysts at ING, Warsh could emphasize the tameness of inflation expectations if he chooses, providing ammunition to hold rates steady. The analysts added that any potential rate hike might be subsequently reversed, with the curve indicating the prospect for deeper cuts later.
Meanwhile, centralized exchange (CEX) trading volumes rose for the first time in five months in June, with spot volumes climbing 15.3% to $1.11 trillion and perpetual volumes tied to real-world assets surging to a record $311 billion. This uptick suggests renewed interest in crypto trading despite the near-term uncertainty around monetary policy. The divergence between price action and volume data highlights the complex dynamics in the market as traders navigate shifting macroeconomic signals.
