Hotter US CPI at 4.2% May Add to Bitcoin Downside, Analysts Say

Persistently elevated U.S. consumer inflation may add further downward pressure on Bitcoin, analysts said.

Cointelegraph reported on June 11 that the U.S. consumer price index rose 4.2% in May from a year earlier. The reading weakened expectations for Federal Reserve rate cuts, and some market participants have even begun discussing the possibility of another rate increase this year.

Iggy Ioppe, chief investment officer at Theo, said the CPI data is likely to keep the Fed cautious. He added that the reading is unlikely to provide a clear bullish catalyst for Bitcoin.

With expectations for rate cuts fading, the prospects for broader liquidity expansion have also diminished. Risk assets are being driven more by investor positioning than by hopes for easier monetary policy, he said.

Markus Thielen, founder of 10x Research, also expects institutional inflows to remain limited for now. The inflation data was not strong enough for Wall Street investors to increase their Bitcoin allocations, he said, adding that more evidence is needed to show inflation is slowing steadily.

He also cited geopolitical tensions involving Iran and rising global oil prices as factors that could rekindle inflation pressure. Bitcoin remains vulnerable, he said, and the chances of it falling below $60,000 in the next few days are increasing.

Tim Sun, a senior researcher at HashKey Group, took a different view on calls for another rate hike. He said the Fed is unlikely to actually raise rates this year. Risk appetite for assets such as cryptocurrencies will recover in earnest only if inflation cools and rate cuts become possible, he added.

Meanwhile, CME FedWatch showed a 98.4% probability that the Federal Open Market Committee will leave rates unchanged at its June 17 meeting.