US CPI Rises 2.7% in June – What Happened to Crypto?

• June CPI rose 2.7%, sparking a brief Bitcoin rally before retracing on cautious sentiment.
• BTC remains in a broader uptrend despite short-term volatility from inflation data.
• Ethereum and other altcoins saw moderate gains, with overall sentiment remaining cautious.

Markets opened cautiously on Tuesday ahead of the U.S. Consumer Price Index (CPI) release. The CPI for June came in at 2.7%. This marked the second consecutive monthly rise and the highest annual figure since February. Investors braced for the impact on risk assets, including cryptocurrencies.

The CPI rose 0.3% in June on a monthly basis, matching expectations. Meanwhile, core CPI, which excludes food and energy, rose 0.2%. The core annual inflation rate increased to 2.9%, slightly below market forecasts. These numbers confirmed that inflation remains sticky in several sectors. Key areas like food, transport, and shelter drove the price increases. Shelter costs eased slightly, but energy and food rose sharply. 

Data Stirs Bitcoin and Altcoins

Bitcoin showed an immediate reaction. Prices jumped from $116,500 to $118,400 within hours of the data release. Traders interpreted the inflation spike as a possible signal for future interest rate changes. Most anticipated that the Federal Reserve might cut rates later this year. However, the sentiment remained mixed.

However, the rally faded quickly. Later in the day, BTC retraced sharply back to below $117,000. This move triggered a liquidation of overleveraged positions across major crypto exchanges. Traders interpreted the drop as a market reset. Some consider this a healthy pullback.

Altcoins followed suit. Ethereum also moved in line with Bitcoin. ETH gained slightly, while other altcoins showed mixed performance. The market mood remained cautious but hopeful. A breakout above $119,250 to $120,700 could confirm renewed bullish strength. This zone has acted as a strong resistance over the past week.

Macro Forces and Rate Cut Expectations

The June CPI report raised fresh questions about the Federal Reserve’s next move. While inflation came in higher, the figures matched consensus forecasts. As a result, market participants shifted focus to upcoming economic data. Specifically, attention turned to the Producer Price Index (PPI) set for release later this week.

According to the CME FedWatch tool, there is a 54.3% chance of a rate cut in September. A weaker PPI print could support that outlook. Traders expect dovish signals to provide further fuel for crypto assets. However, a stronger PPI might cause another short-term correction.

Related: Bitcoin Volatility Drops as Adoption and Regulation Increase

President Donald Trump has repeatedly urged the Fed to cut interest rates. He has also criticized Fed Chair Jerome Powell for being too cautious. Yet, the inflation data may slow the Fed’s plans. The recent CPI increase reflects growing pressure from Trump’s tariffs, which are now affecting consumer prices.

Meanwhile, some analysts remain confident in Bitcoin’s long-term trajectory. They cite an increase in the gap between growing demand and decreasing supply on the exchange. This imbalance in structures, according to them, may put constraints on downside threats in the crypto market.

Despite the recent decline, Bitcoin has retained a wider bullish pattern. It remains above key trend levels. In case of a break above the $120,000 region once again, new highs are likely to be formed. Otherwise, Bitcoin may revisit the lower levels around $112,000. Investors now await the PPI report and the Federal Reserve’s meeting in July. These events can determine the fate of crypto as it either rides another rally or tips further. For now, market sentiment is cautiously optimistic.

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