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Bitcoin’s recent rally took a hit this week after new inflation data from the United States raised concerns about the Federal Reserve’s next moves. The cryptocurrency dropped nearly 5% from its all-time high on Monday, trading around $116,800 at the time of writing.
This decline comes after the U.S. Consumer Price Index (CPI) showed inflation rose for the second month in a row. While the numbers weren’t shocking, they were enough to shake market confidence about a possible interest rate cut in the near future.
US Inflation Rises in June
According to data released Tuesday, the CPI rose by 0.3% in June and is now 2.7% higher year-over-year. Core CPI, which excludes food and energy prices, climbed 0.2% for the month and 2.9% for the year. These numbers mostly matched expectations but marked the fastest yearly inflation increase since February 2025.
Wall Street Journal reporter Nick Timiraos noted the numbers were “close to consensus,” but also pointed out they weren’t as mild as in May. “Core prices rose 0.23% in June… Headline prices rose 0.29%,” he posted on X.
Fed Rate Cuts Now Uncertain
The rising inflation figures have made many analysts question whether the Federal Reserve will delay its rate cuts.
“The Fed isn’t cutting rates anytime soon,” wrote The Kobeissi Letter, a well-known macroeconomic newsletter. “We now have: 1) CPI rising for two straight months, 2) a strong labor market, and 3) new tariffs starting August 1st.”
Christopher Inks from TX West Capital agreed: “CPI has now increased for two months. The Fed has no reason to rush into rate cuts.”
In short, while inflation isn’t spiraling out of control, it’s rising just enough to keep the Fed cautious. And that’s not great news for risk assets like Bitcoin and cryptocurrencies.
Crypto Market Response Mixed
Some traders took a more balanced view. Daan Crypto Trades, a well-followed trader, said the CPI numbers were mostly in line with forecasts. “Core [CPI] was a bit lower, overall CPI was a bit higher. The real test will be how markets digest the data,” he explained.
Andreas Steno Larsen, founder of Steno Research, had an even more positive outlook. He noted that while prices of goods are rising again, inflation in services and housing is slowing. This mix, he said, could actually be good for tech stocks and crypto.
“June CPI confirms our view: goods are quietly starting to reinflate, but disinflation in services and housing still dominates,” Larsen said. “It’s an ideal setup for a portfolio long tech, crypto, and commodities.”
Bitcoin Reacts to Uncertainty
Despite some optimism, the overall market mood is cautious. Bitcoin, which had hit a new all-time high above $123,000 just 24 hours earlier, pulled back to around $116,800 after the inflation report.
Other cryptocurrencies also saw slight declines, though none faced a major sell-off. Traders seem to be waiting for clearer signals from the Fed before making their next big move.
A chart analyst known as “Charting Guy” was more critical of the rate cut crowd. “Inflation still stuck. The Fed pause continues and those screaming for rate cuts look foolish,” he posted, suggesting rates may stay high longer than many expect.
Markets Adjust Expectations
In traditional markets, bond yields rose and the U.S. dollar strengthened. The 10-year Treasury yield jumped to 4.475%, and the U.S. Dollar Index crossed above 98.5. These movements show that investors are adjusting to the idea that interest rates might stay higher for longer.
According to CME FedWatch data, markets now see only a 52% chance of a Fed rate cut in September, down from previous expectations. This cautious outlook is reflected in the Bitcoin and broader crypto market behavior.
Outlook: Bitcoin May Stay Volatile
While Bitcoin is still up significantly year-to-date and holding above key levels, inflation and central bank policy remain major risks. If inflation continues to rise or remains sticky, the Fed may delay easing monetary policy—and that could hold Bitcoin back from a sustained rally.
On the other hand, if inflation cools again in the coming months, we could see renewed optimism for Bitcoin and other digital assets.
For now, the market is treading carefully, with traders watching both macroeconomic data and the Federal Reserve’s tone in upcoming speeches and meetings.
