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TL; DR
- US consumer prices fell 0.4% in June, easing immediate fears of another hike by the Federal Reserve.
- Bitcoin briefly touched $65,500, while Ethereum rose above $1,900 before both gave up part of the rally.
- Renewing the US-Iranian arms deal and significantly reducing traffic through the Strait of Hormuz also brought with it threats to energy and inflation.
Bitcoin went from around $62,600 in the latest US inflation report to a monthly high near $65,500, only to return to the $63,000-$64,000 range as international pressure resumed. Ethereum followed the same pattern, rising from below $1,800 to around $1,945 before falling back into the mid-$1,800s.
The change was not just a failure of the crypto rally. Markets spent the week swinging between two competing macroeconomic indicators: cooling US inflation and a growing conflict that could push energy prices up again.
The CPI Rally Had Its Weak Spots
The The US Consumer Price Index fell by 0.4% in June after a rise of 0.5% in May, showing the biggest monthly decline since April 2020. The average decline, which includes food and energy, was unchanged for the month and increased by 2.6% from a year ago.
The report lowered expectations that the Federal Reserve would raise interest rates at its July meeting. Bitcoin rose above $64,000 after the release, while Ethereum gained more than 6% during the session and continued above $1,900 the next day.
The decline in inflation caused a major crisis. Energy prices fell 5.7% in June and were a significant contributor to the downside reading. This means that part of the support has depended on cheap oil, the same part that is threatened by the new instability in the Middle East.
Hormuz Restored Energy Risk to the Market
The crypto rally weakened as the United States and Iran exchanged attacks and shipping activity through the Strait of Hormuz dropped dramatically.
According to shipments reported by Reutersonly three ships passed through the river on July 16, the lowest daily number since May. No bulk carriers or liquefied natural gas carriers completed the course for the second day in a row.
Shipping is not officially suspended for all shipping. The new US blockade targets Iranian ports and traffic related to Iran, while ships to and from other countries are not prohibited from using the strait. However, the collapse of the project showed that motorists did not want the road to be improved.
The link to crypto is running through oil, inflation and monetary policy. A sustained rise in energy prices could offset June’s inflation rate, reducing the Federal Reserve’s room to ease policy and boosting demand for cash more than speculative products.
Bitcoin Caught Between Two Macro Indicators
Bitcoin’s return to $63,000–$64,000 did not end all post-CPI rebounds, but it did show that the inflation itself was not enough to support a sustained rally. The return of Ethereum below $1,900 gave the same message very clearly as it gave more than 6% initial gain.
The market is now balancing a confirmed drop in June inflation against a stronger shock that was not seen in official consumer price data. This leaves oil prices and shipping through Hormuz as subject to immediate changes Federal Reserve meeting of July 28-29.
A return to the top of Wednesday’s Bitcoin close to $ 65,500 would indicate that inflation-driven demand survived the geopolitical pull. A break below the $62,600 forecast area would instead indicate that the market has completely given up on the CPI rally.
