Bitcoin bulls get tailwind as US inflation expectations cool

Bitcoin posted its best weekly performance since March, rising nearly 7% in the week ended July 5, as cooling US inflation expectations bolstered the case for risk assets.

The rally was driven by a sharp drop in inflation breakevens, which measure market expectations of future price increases by comparing regular government bonds to inflation-protected securities. The two-year breakeven rate fell below the Federal Reserve's 2% inflation target, while longer-term breakevens also declined sharply in recent weeks. This suggests that traders are pricing in a less aggressive monetary policy path, which historically supports speculative assets like cryptocurrencies.

For crypto traders, the shift in inflation expectations is a key tailwind. Lower breakevens imply that the Fed may not need to keep rates elevated for as long, reducing the opportunity cost of holding non-yielding assets like bitcoin. Additionally, the drop in WTI oil prices, a major input to inflation, further reinforces the disinflationary narrative. As macro conditions improve, bitcoin's recent price action could attract more buyers. For real-time crypto quotes, check NowPrice's live tracker.

Looking ahead, traders will watch the upcoming US CPI report for confirmation of the disinflation trend. A softer print could fuel further upside for bitcoin, while a surprise upside might test the recent gains. The 4-year halving cycle and ETF flow dynamics remain additional factors to monitor in the coming weeks.