Cooling inflation boosts risk appetite, Bitcoin broke through $64,000, and Ethereum rose more than 6%

The Zhitong Finance App learned that the US inflation data for June was weaker than market expectations, further strengthening the market's expectations that the Federal Reserve will stay on hold this month. Bitcoin surpassed 64,000 US dollars on Tuesday, and Ethereum's increase was even more obvious. Analysts believe that with the easing of inflationary pressure driven by energy prices, the digital asset market has ushered in a favorable situation, but the geopolitical situation in the Middle East may still influence subsequent trends.

According to data released by the US Bureau of Labor Statistics on Tuesday, the US consumer price index (CPI) fell 0.4% month-on-month in June, higher than market expectations of 0.1%, the biggest monthly decline since April 2020. On a year-on-year basis, the increase in CPI slowed to 3.5%, the first decline in nearly five months.

Excluding food and energy prices, the core CPI rose 2.6% year over year, down from 2.9% in May. It was also better than market expectations, indicating a further easing of potential inflationary pressure.

Boosted by data, Bitcoin rose above $64,000, then remained around $64,500, up more than 4% on the same day; in contrast, Ethereum's performance was stronger, rising more than 6% to around $1,890.

Fabian Dori, chief investment officer of crypto bank Sygnum, said that the latest inflation data sends a positive signal, meaning that the inflationary pressure driven by rising energy prices this spring is gradually fading, rather than spreading further to a wider range of sectors, which is beneficial to the cryptocurrency market.

Previously, due to the escalation of the situation in the Middle East, international energy supply was tightening. The market once feared that rising energy prices might drive up overall inflation and force the Federal Reserve to further tighten monetary policy.

However, after the release of the latest inflation data, the market's confidence in the Federal Reserve keeping interest rates unchanged was further strengthened. According to the CME FedWatch tool, traders expect that the probability that the Federal Reserve will maintain the federal funds rate target range of 3.50% to 3.75% at the interest rate meeting at the end of July will increase markedly. However, the market still generally expects the Federal Reserve to raise interest rates by 25 basis points in September.

Generally speaking, higher interest rates increase the appeal of risk-free assets such as US Treasury bonds, putting pressure on risky assets such as stocks and cryptocurrencies; conversely, loose monetary policy expectations are often beneficial to digital asset price performance.

However, analysts cautioned that the situation in the Middle East is still an important variable affecting the market. As the conflict between the US, Israel, and Iran continues to escalate, there is still great uncertainty about the Federal Reserve's future policy path to control inflation.

Matt Mena, senior cryptocurrency research strategist at 21Shares, said that if the situation in Iran does not deteriorate further, the fundamentals and catalytic factors of the cryptocurrency market are gradually improving, and Bitcoin is expected to hit the $100,000 mark by the end of this quarter.

Meanwhile, reports indicated that the US military plans to re-implement the maritime blockade of Iranian ports on Tuesday. Previously, the US and Iran continued military operations over control of the Strait of Hormuz, and geopolitical risks may still disrupt global financial markets, including cryptocurrencies.