The Bureau of Labor Statistics will publish June CPI data today at 8:30 a.m. ET, and crypto trader CryptoRover believes the coming days may be rough for Bitcoin investors.
CryptoRover posted a message to his 200,000-plus followers today stating that the inflation data was “everything” for Bitcoin, and that a hot reading could accelerate a Fed rate hike, which would have a negative impact on risk assets.
That’s in line with what the Fed is saying. Governor Christopher Waller, who has been one of the dovish voices at the Fed, said Monday at the New York Association for Business Economics that the FOMC will have to “take into account” raising monetary policy in the near term if core inflation continues to run hot.
Waller cited tariffs, Middle East energy prices and the need for AI infrastructure as the three factors that have kept core services inflation elevated, as core PCE rose from 3% in December to 3.4% in May.
Waller voted against the rate hike at the last Fed meeting, and has been one of the few remaining doves on the board since Kevin Warsh became chair.
A warning from him is not the same as a warning from a known hawk. His comments already moved markets before the data even printed. The money markets have upped their odds of another Fed rate hike to about 51.6% in just a few days.
The Wall Street consensus is for headline CPI to ease to about 3.8% to 3.9% year-over-year from May’s 4.2%, primarily due to a 10% decline in gasoline prices linked to the now-defunct US-Iran ceasefire.
The Fed’s watchdog, core CPI, is projected to remain around 2.9%, which is still above the Fed’s 2% target, and is moving in the wrong direction since March.
That’s the disconnect that CryptoRover is pointing to: A nice round number could be a sign of a deeper inflation issue, and the Fed has stated that.
Some of that risk is already priced into Bitcoin. The asset fell below $63,000 as tensions between the United States and Iran over the past week have grown more intense, while BlackRock’s spot Bitcoin ETF saw $59 million in withdrawals as institutional investors grew cautious ahead of the print.
Fidelity’s Jurrien Timmer has suggested that Bitcoin may be in a new accumulation phase after a final pullback, which is heavily dependent on the Fed’s rate path from here.
Bitcoin has also found itself in historically oversold territory against gold, a condition some traders interpret as a contrarian buying opportunity if macro pressure abates.
The mechanics are simple. The higher-than-expected CPI reading boosts the likelihood of a rate hike at the Fed’s July 28-29 meeting, which raises the opportunity cost of holding a non-yielding asset such as Bitcoin and usually leads to a rotation into Treasuries.
A softer print does just the opposite, and would argue for a hold or potential cut later this year.
CryptoRover’s warning is actually a wager on Waller’s words not being empty rhetoric. Today’s CPI print carries more weight than a typical monthly release, given Waller’s dovish reputation and the money markets’ repricing in light of it.
Traders will have their answer within seconds after the 8:30 a.m. print, and the second data point will come with the June PPI report tomorrow before the Fed’s month-end decision.
