Bitcoin Traders Eye US Inflation Data Amid Hawkish Fed Expectations

Bitcoin (BTC) is trading near $63,800 as traders await the release of the US Consumer Price Index for July. The figure could influence expectations for Federal Reserve interest rate hikes and trigger a fresh wave of volatility across the cryptocurrency market.

The fundamental backdrop appears largely unchanged, with the United States and Iran remaining deadlocked over negotiations to reopen the Strait of Hormuz. Separate attacks by the United States and Yemen's Iran-aligned Houthis on vessels in the region are keeping oil prices and inflation concerns elevated.

According to CME Group's FedWatch Tool, the probability of a US interest rate hike in September is close to 50%. A stronger-than-expected core inflation reading could reinforce expectations for a more hawkish Federal Reserve stance, supporting safer assets such as the US dollar and Treasury yields while weighing on risk-sensitive assets like Bitcoin.

Conversely, weaker-than-expected inflation could revive expectations for lower interest rates, potentially weakening the dollar and Treasury yields while supporting Bitcoin. However, traders should remain cautious, as persistent geopolitical uncertainty could limit the market's initial reaction and leave Bitcoin vulnerable to sharp volatility following the inflation release.