On Thursday, a significant report called the U.S. Consumer Price Index (CPI) is coming out. This report tells us if things cost more or less than before. This time, things will cost a little bit more in June than they did in May. Over a year, things have gotten about 3.1% more expensive. If true, the U.S. is on track to reach the Federal Reserve’s (Fed) target of 2% inflation. Inflation is when things get more expensive over time.

Future of Bitcoin Hinges on U.S. Inflation Data and Bond Market

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• Thursday’s U.S. CPI data release will significantly influence Bitcoin’s market direction.
• The expected rate cuts, based on CPI data, could help Bitcoin recover from its recent price stagnation.
• Reactions from the U.S. Treasury yield curve to the CPI data are anticipated to affect the overall market sentiment, with central banks forecasting a steeper yield curve including JPMorgan and Citi.

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If the U.S. is on track, the Fed might start cutting rates. Cutting rates means that the Fed makes it cheaper for banks to borrow money. When banks can borrow money cheaply, they can lend it to people and businesses more cheaply, too. This is good for risky assets like Bitcoin because it can help their prices go up.

Currently, Bitcoin’s price has been stuck. It fell to around $53,500 on July 5 and has had trouble getting past $59,000 since then. But if the Fed cuts rates, it might help Bitcoin’s price go up.

The company Wintermute, which uses computers to trade, thinks the market will react strongly to the CPI data. In an email to CoinDesk, they said that if the Fed cuts rates, it could make people more likely to invest in cryptocurrencies.

Even though inflation has fallen from 9.1% in 2022, the Fed wants to see it fall even further before cutting rates. Jerome Powell, the Fed’s head, said this when he spoke to Congress recently.

Another thing that could affect Bitcoin is how the U.S. Treasury yield curve reacts to the CPI data. The yield curve shows how much you can earn from lending the government money for different lengths of time. If inflation slows down and the Fed is expected to cut rates, people might be willing to pay more for a two-year note, decreasing its yield. However, the yield on the 10-year note might stay high because people worry that the government will borrow more money if Trump becomes president.

Noelle Acheson, who writes a newsletter called Crypto Is Macro Now, said that the yield curve has gotten steeper because of all the uncertainty in U.S. politics. She thinks this could make a Trump win more likely, leading to higher inflation because of tariffs and more government borrowing to pay for tax cuts.

Big banks like JPMorgan and Citi think the yield curve will get steeper.

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