Inflation Cools but Crypto Markets Stay Frozen as Bitcoin Shrugs Off CPI Data

Inflation’s Muted Message: Why Crypto Markets Stayed Flat

The latest inflation data should have been good news for risk assets like Bitcoin and crypto broadly. The U.S. consumer price index increased just 0.1% in July, a modest uptick from June’s decline and right in line with expectations, according to the Bureau of Labor Statistics. Over the past year, prices have risen 3.4%, down from 3.5% in June. Yet despite the dovish signal—softer inflation typically nudges the Federal Reserve toward lower interest rates—Bitcoin barely budged, gaining only about 0.3% on the day to settle around $63,750. The broader crypto market slipped even more, with total market capitalization declining roughly 0.9%.

What the Data Showed

The inflation slowdown was largely driven by shelter, which rose just 0.1% and accounted for nearly two-thirds of July’s monthly increase, according to the Bureau of Labor Statistics. Energy prices moved in the opposite direction, dropping 1.5% as gasoline prices fell. Core inflation—the measure that excludes food and energy and receives closer attention from the Federal Reserve—rose 0.2% in July and 2.5% over the year, remaining well above the central bank’s 2% target.

Markets Had Already Priced in the Move

The lack of a crypto rally becomes clearer when considering market timing: investors had already been pricing in softer inflation for weeks. Spot Bitcoin exchange-traded funds had pulled in approximately $854 million over five consecutive trading sessions the previous week, their strongest stretch since May, as rate-hike expectations faded. That relief trade had already happened before the CPI data arrived, leaving little room for additional upside on the actual number.

Beyond the timing issue, several technical headwinds continued to weigh on Bitcoin. The asset remains trapped between $62,000 support and $67,000 resistance, with its 50-day moving average sitting below its 200-day average—a bearish technical signal. The token has held below $65,000 since a sharp early-August selloff, and trend strength remains weak.

Markets weren’t expecting a major catalyst anyway. Even though the inflation print represented good news in principle for risk assets, the 3.4% reading fell far short of what might meaningfully shift Federal Reserve policy. At that level, inflation still sits significantly above the Fed’s 2% target, meaning the door to rate cuts wasn’t cracked open by this data. Traders on the Myriad prediction market—operated by Dastan, Decrypt’s parent company—largely reflected this measured outlook, pricing in only a 17% probability that Bitcoin reaches $70,000 this month. Prediction markets viewed a slide toward $55,000 as more likely than a move toward $84,000.

Bitcoin’s muted response also reflected earlier disappointment. A weak jobs report the prior week had suggested Federal Reserve policy could shift dovish, yet Bitcoin failed to rally on that macro signal either. A second consecutive macro catalyst falling flat underscores that technical and sentiment headwinds are outweighing headline-friendly economic data at present.

The disconnect between improving macro conditions and crypto’s lackluster performance suggests that technical factors and broader market sentiment may be mattering more than macro catalysts for Bitcoin and XRP alike right now.

Source: Bureau of Labor Statistics, via Decrypt. Not financial advice.