CoinDesk
Bitcoin and major cryptocurrencies fell 2% or more in the past 24 hours as traders sharply repriced the Federal Reserve's near-term path, lifting the implied probability of a July rate hike to roughly 50% from about 10% just days ago, according to Bloomberg money-market data. The shift follows comments from Fed Governor Christopher Waller suggesting officials may need to raise rates to bring price pressures back under control.
The hawkish move rippled through fixed income: the two-year U.S. Treasury yield climbed to 4.29%, its highest level since early last year, with the front end of the curve absorbing the bulk of the repricing as oil and geopolitics forced markets to rethink the disinflation timeline.
Why it matters
The repricing is being driven by a fresh inflation impulse from energy rather than a hot core CPI print. West Texas Intermediate crude has surged to nearly $80 a barrel from $67 at the start of the month, after President Donald Trump reinstated a U.S. blockade of Iranian vessels transiting the Strait of Hormuz and demanded a 20% reimbursement fee on cargo passing through the waterway. With oil now a wildcard for headline inflation, traders are no longer willing to price a Fed that stays on the sidelines in July.
Investors are now positioned around two near-term catalysts: Tuesday's June CPI release from the Bureau of Labor Statistics at 8:30 a.m. ET, and Fed Chair Kevin Warsh's congressional testimony on Capitol Hill. Consensus expects headline and core inflation to both decline for the first time since January, but a flat or hot print would reinforce the rate-hike narrative already priced into the curve.
Market impact
Bitcoin is leading the move lower across majors, but the asymmetry is in rates, not spot. Two-year yields at 4.29% reset the discount applied to long-duration risk assets, and perps funding has tilted negative as leveraged longs de-risk ahead of CPI. ING analysts note that even if Warsh leans hawkish, the richness in the five-year part of the curve signals markets expect any hike to be reversed, with eventual cuts still larger than any hike delivered.
Frequently asked questions
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Why is Bitcoin dropping right now?
Crypto is selling off as traders repriced the Federal Reserve's near-term path, lifting the implied probability of a July rate hike to roughly 50% from about 10% a few days earlier, after Fed Governor Christopher Waller suggested officials may need to raise rates to rein in price pressures.
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What role is oil playing in the Fed repricing?
West Texas Intermediate crude has surged to nearly $80 a barrel from $67 at the start of the month, after President Trump reinstated a U.S. blockade of Iranian vessels in the Strait of Hormuz and demanded a 20% fee on cargo transiting the waterway, putting a fresh energy impulse into the inflation outlook.
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What is the two-year Treasury yield signalling?
The two-year U.S. Treasury yield jumped to 4.29%, its highest level since early last year, reflecting the front end of the curve absorbing the bulk of the hawkish repricing as traders expect tighter policy in the near term.
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What are the two key catalysts this week?
Traders are watching Tuesday's June consumer-price index release from the Bureau of Labor Statistics at 8:30 a.m. ET and Fed Chair Kevin Warsh's congressional testimony on Capitol Hill, both of which could confirm or dispel the July hike narrative.
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What did ING say about the Fed's likely path?
ING analysts noted that the richness in the five-year part of the curve tells markets any hike, if delivered, would likely be reversed, with bigger cuts than hikes still the base case, leaving Tuesday's CPI as the binary near-term event.
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