Bitcoin broke above $65,000 on Wednesday, its highest level in weeks, after a softer-than-expected US inflation reading reduced the chances of another Federal Reserve rate hike. The move came as traders recalibrated their outlook for monetary policy, with rate hike odds dropping sharply in the futures market.
The data behind the move
US inflation dropped in June, according to the latest Consumer Price Index report released this morning. The annual rate came in below consensus estimates, marking the second consecutive month of cooling price pressures. That was enough to shift the narrative around the Fed's next move.
Before the data, markets had been pricing in a roughly 40% chance of a rate hike at the July meeting. That probability has now fallen to around 15%, according to CME FedWatch data. A rate cut is still off the table, but the immediate threat of tighter policy has receded.
Bitcoin's reaction
Bitcoin jumped from around $63,000 to above $65,000 within an hour of the release. The move was accompanied by a surge in spot volumes on major exchanges like Binance and Coinbase. Altcoins also rallied, with Ethereum briefly touching $3,500.
The timing matters. Bitcoin had been stuck in a narrow range for most of July, struggling to hold above $62,000. The inflation print provided the catalyst traders were waiting for.
What traders are watching next
All eyes now turn to the Fed's July 29-30 meeting. With rate hike odds diminished, the focus shifts to the dot plot and any changes in the Fed's language around inflation. A dovish hold could extend the rally; a hawkish surprise would reverse it.
For now, the macro backdrop is the friendliest it's been in months for risk assets. Whether Bitcoin can hold above $65,000 will depend on whether the inflation trend continues — and whether the Fed acknowledges it.
