Blockchain
Bitcoin (BTC) price surges after June CPI turns negative
According to the government’s Consumer Price Index (CPI) report released Thursday morning, inflation continued to decline in June, with the June rate hitting a negative 0.1%, compared to forecasts for a 0.1% increase and 0.0% in May.
On an annual basis, the consumer price index rose 3.0% versus expectations of 3.1% and 3.3% in May.
The core consumer price index (CPI) – which excludes food and energy costs – also came in better than expected, rising 0.1% in June versus expectations of 0.2% and 0.2% in May. The year-on-year core consumer price index rose 3.3% versus expectations of 3.4% and 3.4% in June.
The price of bitcoin (BTC) jumped to $59,100 in the minutes after the report was released, up nearly 2% in the past 24 hours.
A check of traditional markets finds U.S. stock index futures rising, with the 10-year Treasury yield down nine basis points to 4.20%. Gold is up 1% at $2,404 an ounce.
Ahead of Thursday morning’s report, market participants were increasingly warming to the idea that the U.S. Federal Reserve would finally cut its benchmark federal funds rate at its mid-September meeting. CME FedWatch Tool they put the odds of that happening at more than 70% up from less than 50% just a month ago. It was an idea that Fed Chairman Jerome Powell he tried to neither confirm nor deny in two days of testimony before Congress earlier this week.
In that testimony, Powell acknowledged a weakening labor market and that the Fed is increasingly focusing on downside risks to the economy. But he reiterated, as he and other Fed officials have 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 it surged to an all-time high above $73,500 at the end of the first quarter. The second quarter saw slowing inflows and even, on occasion, notable net outflows into U.S.-based spot ETFs. Then, in late June and early July, a surge in supply from government holding sales and the return of Mt. Gox tokens sent the price crashing to below $54,000 at one point, nearly 27% below that all-time high.
Bitcoin’s plunge could be even more frustrating for bulls as other competing risk assets, namely U.S. stocks, have continued to rise throughout the summer. Just yesterday, the S&P 500 and Nasdaq completed their seventh consecutive day of gains, each marking new record highs.
Shortly after these latest inflation numbers, the odds of a September rate cut jumped to 87%, and the odds of two or more rate cuts by the Fed’s November meeting jumped to nearly 50%. In parallel, the U.S. dollar index fell nearly 1%, a very sizable move for that indicator. Whether this will become the catalyst for a new bull run for bitcoin remains to be seen.