Stocks and crypto markets drifted upwards on Tuesday, July 5th, after the US released mixed consumer inflation data.
Futures tied to the Nasdaq 100 and S&P 500 rose 160 and 30 points respectively. Bitcoin (BTC) cut some of its initial losses and returned to above $118,000. Other Altcoins like Ethereum (Eth) and Cardano (ADA) have also erased some of the losses.
Stocks and crypto markets rose after data from the Bureau of Labor Statistics data showed that core inflation excluding volatile food and energy prices missed analyst estimates for the fifth consecutive time.
Core CPI rose from 0.1% in May to 0.2% in June, failing to reach its 0.3% forecast. The annual figures rose from 2.8% to 2.9%, with the expected rise to 3%.
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The report also showed that headline consumer inflation rose from 2.4% to 2.7% year-on-year, and increased from 0.1% to 0.3% on the moon. The yearly increase coincided with what the analysts voted for by Reuters were hoping.
Stocks and crypto markets rose, but bond yields fell as data pointed to potential interest rate cuts at the Federal Reserve meeting in September. This is because the monthly core inflation figure of 0.2% is in line with the Fed's 2% target.
Both the stock and bond markets responded favorably to US CPI data in June. This is roughly aligned with the consensus prediction or slightly softer. in particular:
Monthly headline inflation was 0.3%, with an annual scale of 2.6%.
Core inflation, monthly…-Mohamed A. El-Erian (@Elerianm) July 15, 2025
The Fed repeated that it remains > what's next for the crypto market?
The cryptocurrency market could work well in the long term as analysts expect the Federal Reserve to begin interest rate cuts later this year.
The rate reduction odds have jumped to 82% on polymate, but most users are hoping for a cut twice this year. Wall Street analysts at agencies like Goldman Sachs have foreseen three cuts this year, while Morgan Stanley is hoping for seven in 2026.
Cryptocurrency and other risky assets tend to work well if the Fed is easing its policy, as seen again during the COVID-19 pandemic and in 2024.
The rally is also driven by the dynamics of supply and demand. The influx of Bitcoin and Ethereum ETFs and demand from the Corporate Treasury has risen, and exchange token supply continues to decline.
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