Bitcoin retreated to $62,400 early Tuesday as bond traders aggressively adjusted their positions ahead of the June US consumer price index report. The broader macroeconomic environment shifted rapidly following the collapse of the US-Iran ceasefire, which pushed oil prices back up and complicated the Federal Reserve’s inflation outlook.
Market-implied probabilities for a quarter-point interest rate increase in July surged to roughly 50 percent, a sharp jump from less than 10 percent just days ago. The two-year US Treasury note’s yield, a highly sensitive indicator for Fed policy expectations, climbed above 4.25 percent. This widening margin exceeds the current policy rate and immediately pulled capital away from risk-on assets.
The Deflationary Setup Reverses
Prior to this week’s adjustment, cryptocurrency markets were pricing in a strong deflationary impulse. Bitcoin had just recorded its best weekly performance since March, rallying nearly 7 percent. That momentum was driven by the two-year inflation breakeven rate dropping below 2 percent for the first time since 2024.
That optimism faded as geopolitical realities set in. Oil prices returning to pre-conflict levels threatened to undo recent progress on headline inflation, while underlying core inflation remains sticky at 2.9 percent.
Hawkish commentary from Fed Governor Christopher Waller accelerated the selloff. Waller suggested a near-term rate increase remains on the table if core inflation readings stay hot. The market is now focused entirely on the upcoming CPI data and Chairman Warsh’s testimony before Congress, scheduled for July 14 and 15.
What Surging Treasury Yields Mean for Crypto Assets
The aggressive repricing in the bond market creates a direct headwind for Bitcoin. When the two-year Treasury yield spikes past 4.25 percent, institutional investors receive stronger risk-free returns, reducing the incentive to hold volatile digital assets.
The sudden shift from a 10 percent to a 50 percent probability of a July rate hike shows exactly how fragile the recent crypto rally was. Bitcoin’s earlier surge relied entirely on the assumption that energy prices would remain suppressed. With Middle East tensions escalating again, that underlying thesis is broken.
The Bottom Line
For investors trading through this week’s economic data releases, the consensus dictates caution. A 50 percent probability of a July hike means the bond market is entirely split. Until the CPI figures print and Chairman Warsh explicitly outlines the central bank’s tolerance for the recent energy price rebound, entering new long Bitcoin positions carries high short-term risk.