Bitcoin Falls as July Fed Rate Hike Bets Rise Ahead of Inflation Data

Here’s a tighter, more polished rewrite:

Major cryptocurrencies slid by 2% or more over the past 24 hours as traders sharply increased bets on a July Federal Reserve rate hike.

The broader crypto market is facing renewed pressure amid rising expectations that the Fed could tighten policy as soon as this month, just ahead of key U.S. inflation data and congressional testimony from Chair Kevin Warsh.

Bitcoin dropped more than 2% to around $62,380, while Ether, XRP, and other major tokens posted similar losses, according to CoinDesk data.

In money markets, the probability of a July rate hike has climbed to about 50%, up from roughly 10% only days ago, based on Bloomberg data. The repricing follows remarks from Fed Governor Christopher Waller suggesting additional tightening may be necessary to control inflation.

Bond markets have reacted as well, with the two-year U.S. Treasury yield rising to 4.29%, its highest level since early last year. This maturity is particularly sensitive to changes in short-term policy expectations.

The shift toward a more hawkish outlook is partly driven by escalating tensions between the U.S. and Iran, alongside a sharp increase in oil prices. President Donald Trump reinstated a blockade on Iranian vessels transiting the Strait of Hormuz and imposed a 20% fee on other shipments using the route.

As a result, West Texas Intermediate crude futures have surged to nearly $80 per barrel from $67 at the start of the month, adding to inflation concerns.

Focus turns to CPI and Warsh testimony

Investors are now looking ahead to the June consumer price index report, due Tuesday morning from the Labor Department.

Economists surveyed by Bloomberg expect headline inflation to ease below a 4% annual rate, with the report likely to show the first decline in both headline and core inflation since January, following May readings of 4.2% and 2.9%.

Even so, the data may be viewed as backward-looking given the recent spike in oil prices. If inflation proves stickier than expected, it could heighten concerns about the Fed’s policy path.

Markets will also be watching closely as Kevin Warsh testifies before Congress. Given his typically cautious approach to forward guidance, investors will be alert for any signals on interest rates and inflation.

Analysts at ING say Warsh could emphasize subdued inflation expectations, giving him room to hold rates steady. They added that even if a hike does occur, it may ultimately be reversed, with markets still anticipating deeper rate cuts over time.