From CPI negative growth to an unexpected drop in PPI—how is the crypto market pricing a shift in macro policy?

In the second week of July 2026, two inflation reports released by the U.S. Bureau of Labor Statistics prompted global financial markets to recalibrate policy expectations. June CPI fell 0.4% month over month, the largest single-month decline since April 2020; immediately afterward, June PPI dropped 0.3% month over month, the largest single-month drop since April 2020. With both major inflation indicators retreating more than expected at the same time, the probability of a Federal Reserve rate hike in July plunged from 41.7% before the data release to 15.5%. As of July 16, Bitcoin was quoted at $64,586.1; over two weeks it rebounded more than 8% from the $59,660 low. Ethereum rebounded nearly 20% from its $1,601 low. This macro-data-driven recovery provides a clear observational window for understanding the transmission mechanism between crypto assets and inflation expectations.

What does the unexpected 0.3% drop in June PPI really mean?

The Producer Price Index (PPI) is considered a leading indicator of inflation, and its trend often foreshadows the direction of CPI in the coming months. In June, the U.S. final-demand PPI fell 0.3% month over month, significantly below market expectations of flat; the year-over-year growth narrowed to 5.5%, down clearly from 6.0% in May. Structurally, terminal goods PPI plunged 1.4% month over month, the largest single-month decline since July 2022. Within that, the energy component fell 6.4% month over month, and gasoline prices dropped 12% in a single month. The sharp retreat in energy prices is the core driver behind PPI’s downside surprise.

However, there is clear divergence within the data. Excluding food, energy, and trade services, core final-demand PPI edged up 0.1% month over month, and the 12-month year-over-year figure remained stable at 5.1%. Terminal services PPI rose slightly 0.2% month over month, while retail fuel gross margins surged 13% in one month. This means the decline in upstream energy costs has not yet been fully transmitted to mid- and downstream services industries, and the “stickiness” of inflation remains. Looking over a longer cycle, year-over-year gains across the entire industry chain are still elevated—level-one raw materials at 11.0%, level-two manufacturing at 9.8%, level-three supporting industries at 6.8%, and level-four terminals at 6.5%. The short-term drop in PPI is more a stage-specific mapping of energy price volatility than a fundamental clearing of upstream cost pressures.

How do CPI and PPI cooling in succession change the market’s pricing logic for Fed policy?

The simultaneous weakening of CPI and PPI in a short period has substantially rewritten the market’s expectations for the Fed’s policy path. June CPI fell 0.4% month over month, and rose 3.5% year over year, below expectations of 3.8%; core CPI fell to 2.6% year over year, below the expected 2.8%. Energy prices became the biggest drag item, pulling CPI down by 0.43 percentage points month over month.

After the data release, the CME FedWatch tool showed that the probability of a 25-basis-point rate hike by the Federal Reserve in July dropped sharply from 41.7% to 15.5%. The 2-year Treasury yield fell by more than 7 basis points in a single day to 4.185%, and the 10-year Treasury yield dropped to 4.583%. The U.S. Dollar Index retreated to around 100.5. Market pricing quickly shifted from “a rate hike is imminent” to “hold steady” as the baseline scenario.

However, this does not mean that the rate-cut cycle is right around the corner. In congressional testimony, Fed Chair Wersh clearly emphasized that the Fed should not declare the anti-inflation mandate complete due to a single month of better data; policymakers still maintain “zero tolerance” for persistently high inflation. The stickiness of core services prices, structurally high transportation costs, and energy price uncertainty brought by renewed escalation in the Middle East conflict suggest that the current period of breathing room may only be temporary.

From a sudden plunge in rate-hike expectations to risk-on recovery: how does macro sentiment transmit into crypto assets?

Crypto assets, as high-beta risk assets, have fully demonstrated their sensitivity to U.S. dollar liquidity and policy expectations during this data-release cycle. After inflation data broadly weakened, concerns about the Fed tightening policy further largely evaporated, and risk appetite recovered in tandem. After the CPI data was released on July 14, Bitcoin rebounded first; after the PPI data on July 15 further confirmed the cooling trend, Bitcoin broke above $65,500 intraday, reaching a three-week high since June 22.

The logic of this transmission chain is clear: rate-hike expectations fall → Treasury yields decline → the dollar weakens → valuations of dollar-denominated risk assets rise. As of July 16, Bitcoin was quoted at $64,586.1. The total market capitalization of cryptocurrencies exceeded $2.3 trillion. The three major U.S. stock indexes rose for the second consecutive day, and the S&P 500 moved close to a one-month high. The synchronized rebound in risk assets shows that the market is repricing the scenario of “a slower tightening path,” rather than a purely event-driven pulse.

Why did Bitcoin and Ethereum show differentiated performance in this rebound?

Although both Bitcoin and Ethereum benefited from an improvement in macro sentiment, there were significant differences in the rebound magnitude and the driving factors. Over the past two weeks, Bitcoin rebounded more than 8% from the $59,660 low, while Ethereum rebounded nearly 20% from its $1,601 low. Ethereum’s upside elasticity was clearly stronger.

This differentiation can be understood across several dimensions. First, Ethereum had fallen more deeply in the earlier decline—after a sharp retracement from the $2,400–$2,500 range at 2025 highs to around $1,500–$1,600—so the deeper drop corresponds to a larger space for technical repair. Second, as of July 16, Ethereum has effectively held above the $1,900 integer level; the daily MACD formed an early golden-cross pattern below the zero axis, which is the first daily-level strengthening signal since late June. Third, market expectations for institutional adoption in the Ethereum ecosystem are independent of macro factors.

That said, it’s important to note that both face constraints on the trading-volume front. After Bitcoin broke above $65,000, upside momentum has slowed somewhat; during this rebound, Ethereum’s trading volume has continued to shrink. This means the current rebound is more of a “relief rebound” rather than a trend reversal.

Can upstream inflation cooling be sustained? Structural concerns masked by energy prices

The broad weakening of June inflation data was largely due to a sharp drop in energy prices. In June, the energy index fell 5.7% month over month, including a 9.7% month-over-month decline in gasoline prices. However, energy price fluctuations are highly uncertain and have a distinctly stage-specific character.

Geopolitics is the biggest variable. As tensions between the U.S. and Iran escalated and the U.S. announced it would resume a maritime blockade of Iran, international crude oil futures rose more than 9% by the close on July 13, the largest single-day increase since May 2020. If the situation in the Middle East remains tense, oil prices could rebound quickly, which would reverse the current inflation-cooling trend.

In addition, the structural stickiness of core inflation cannot be ignored. Housing prices are still growing at a 3.3% year-over-year rate; core PPI remains elevated at 5.1%; and freight rates remain high due to a shortage of truck drivers. These factors imply that even if energy prices continue to decline, the downward slope of core inflation may still be quite limited. The probability that the Fed will hold steady this year remains relatively high, and launching a rate-cut cycle still requires more data verification.

If the inflation trend confirms a turn, how will the pricing logic for crypto assets be reshaped?

The market’s current pricing already reflects the scenario of “no rate hike in July.” But the more critical question is: if inflation data continues to cool over the coming months, how will the market price a longer-cycle policy path?

Based on historical experience, improvements in expectations for U.S. dollar liquidity typically provide structural tailwinds for crypto assets. The fading of rate-hike expectations means the opportunity cost of holding non-yielding assets (such as Bitcoin) declines; a weaker dollar directly boosts the valuation of dollar-denominated assets. If the market begins pricing a rate-easing cycle at the end of 2026 or the beginning of 2027, crypto assets may see a more sustained valuation repair.

However, this projection is constrained by multiple prerequisites. First, inflation data needs to continue to validate the cooling trend in the coming months—any reversal in a single month’s data could quickly flip risk appetite back. Second, Fed Chair Wersh has already stated that interest-rate tools remain on the table, and policymakers’ determination to combat inflation has not wavered because of single-month data. Third, $67,200 is viewed by the market as a key resistance level for Bitcoin; if it cannot be broken through effectively, the market may continue to move within a choppy consolidation range.

Therefore, the more reasonable positioning now is to view this rebound as an “expectation correction” rather than “trend confirmation.” The market’s core contradiction still lies in this question: is the cooling of inflation structural or only episodic? The answer will determine the center of gravity for crypto asset pricing over the next several quarters.

Summary

U.S. June CPI and PPI both fell more than expected, driving down the probability of a July Fed rate hike from 41.7% to 15.5%, and risk assets saw a phase of recovery. Bitcoin rebounded cumulatively by more than 8% over two weeks, and Ethereum rebounded nearly 20% from the lows. However, this round of inflation cooling relies heavily on the decline in energy prices; the stickiness of core inflation and the uncertainty stemming from Middle East geopolitics mean the sustainability of the downward trend remains in question. The rebound in crypto assets mainly reflects the market’s correction of expectations for “a slower tightening path,” rather than a signal of trend reversal. In the coming months, the direction of inflation data and how geopolitics impacts energy prices will be the core variables determining the crypto asset pricing logic.

FAQ

Q1: What are the specific figures for the U.S. June PPI data?

A: The U.S. final-demand PPI in June fell 0.3% month over month and rose 5.5% year over year, significantly below market expectations of 6.2%. Core PPI rose 4.7% year over year, below the expected 5.2%.

Q2: After CPI and PPI both cooled, how did the probability of a Fed rate hike in July change?

A: According to the CME FedWatch tool, the probability of a 25-basis-point Fed rate hike in July dropped sharply from 41.7% before the data release to 15.5%. The market has largely priced holding steady in July as the baseline scenario.

Q3: How did Bitcoin and Ethereum perform in this rebound?

A: As of July 16, 2026, Bitcoin was quoted at $64,586.1; over two weeks it rebounded cumulatively by more than 8% from the $59,660 low. Ethereum rebounded nearly 20% from its $1,601 low.

Q4: Can this round of inflation cooling be sustained?

A: There is significant uncertainty. Inflation cooling depends mainly on the decline in energy prices, but Middle East geopolitical conflicts could push oil prices higher. At the same time, core services prices remain sticky, and core PPI year-over-year stays at a high level of 5.1%. Single-month data is insufficient to confirm a structural shift.

Q5: Is the current rebound in crypto assets a trend reversal?

A: At present, it is more of a “relief rebound” than a trend reversal. Market pricing reflects a correction of expectations for slower Fed tightening. $67,200 is Bitcoin’s key resistance level; the next move still depends on the persistence of inflation data and changes in geopolitical risk.