Bitcoin climbed back above $65,000 on Monday, rising about 1% to $65,155, as a pause in US-Iran strikes revived demand for risk assets. Ethereum gained 4% to around $1,964, its highest level since early June. The moves come ahead of the Federal Reserve's two-day meeting that concludes Wednesday, where markets are pricing a one-in-three chance of a 25-basis-point rate hike.
Geopolitical tensions ease
The rebound was driven by a halt in hostilities between the US and Iran, which had rattled markets last week. Brent crude dropped 6.5% to about $90.45 a barrel as the geopolitical premium unwound. Lower oil prices tend to support risk-on sentiment, and crypto benefited alongside equities. The timing isn't great for the Fed — it's trying to gauge whether inflation is truly cooling, and a sudden drop in energy costs complicates that picture.
Fed decision in focus
The probability of a rate hike this week jumped to 33% from 16% a week earlier, reflecting a rapid reassessment of monetary policy. But about two-thirds of the market still expects the Fed to keep its target range unchanged at 3.50% to 3.75%. The central bank's June statement cited supply shocks, including energy, as contributing to elevated inflation. Since then, the consumer price index has taken a sharp turn lower.
Inflation data supports case
The CPI fell 0.4% in June from the previous month — the biggest monthly decline since April 2020. Annual inflation slowed to 3.5% from 4.2% in May, while core inflation eased to 2.6% from 2.9%. The energy index fell 5.7% in June after rising in each of the previous three months. That's the kind of data that could give the Fed cover to hold steady, even as some officials worry about sticky services inflation.
What the Fed might do
The median Fed official projected the federal funds rate at 3.8% at the end of 2026, above the midpoint of the current target range. Nine of 18 officials saw at least one rate increase as appropriate before year-end. Markets price a roughly 77% probability of a rate increase by September. A hawkish Fed decision could weigh on Bitcoin, while a less hawkish message could support further rebound. The decision lands Wednesday afternoon — and crypto traders will be watching closely.
