Bitcoin Slumps Amid Hawkish Fed Stance and Stubborn Inflation
Crypto markets closed July on a down note as Bitcoin fell 2.5% to $62,464 on Friday amid a stock rally that saw equities surge 1.7% and 2.8%. The Federal Reserve's hawkish stance and stubbornly high inflation pushed the rate cut that bulls were counting on further out of reach.
The Fed held rates at 3.50%, 3.75% on Wednesday, its fifth consecutive hold, with Chair Kevin Warsh warning 'there is no soft inflation target' and emphasizing 'this Fed will not waver.' Data later confirmed this stance as June PCE inflation came in at 3.7%, down from 4.1%, but far above the 2% target.
Bitcoin still gained 4.3% in July, bouncing from under $58,000 early in the month, and the broader CoinDesk 20 index posted its first positive month in three. However, this momentum was largely fueled by a rebound from an earlier low rather than any fundamental change in market conditions.
The backdrop rewards equities on earnings strength and leaves crypto without its catalyst. Options traders are positioned for a rough August, with the $60,000 Bitcoin put being the largest open interest position at $1.17 billion notional.