Bitcoin Joins Risk-Asset Relief As PCE Inflation Follows Expectations

Bitcoin (BTC) shook off volatility on Thursday as US stocks rebounded on the back of inflation-data relief.

Key points:

• Bitcoin avoids a snap reaction to US personal consumption expenditures (PCE) inflation data, which reverses a local uptrend.
• Analysis remains wary of inflationary tendencies despite PCE conforming to expectations.
• Bitwise predicts that going forward, Bitcoin will become less sensitive to Fed interest-rate changes.

PCE ends uptrend while staying above Fed inflation target

Data from TradingView showed BTC price action focusing on $64,500, broadly unchanged from the day prior. 

BTC/USD one-hour chart. Source: Cointelegraph/TradingView

The major risk-asset headwind from earlier in the week in the form of a mass sell-off in semiconductor stocks eased on the day, sparing crypto during the US trading session. The S&P 500 index and Nasdaq Composite index were up 1% and 2.3%, respectively, at the time of writing.

Nasdaq Composite Index one-day chart. Source: Cointelegraph/TradingView

The June print of the US Personal Consumption Expenditures (PCE) index added another positive catalyst, this coming in at 3.7% year-on-year — in line with market expectations. May’s PCE print, at 4.1%, was the highest in three years.

PCE is considered the Federal Reserve’s preferred inflation measure as it offers a broader and more comprehensive measure of inflation and more quickly picks up adjustments in consumers’ choices in response to price changes, according to the Federal Reserve Bank of Cleveland.

“The increase in current-dollar personal income in June primarily reflected increases in compensation, personal income receipts on assets, and government social benefits that were partly offset by a decrease in farm proprietors’ income,” the US Bureau of Economic Analysis (BEA) said. The BEA said in its data release: 

“The $65.2 billion increase in current-dollar PCE in June reflected increases of $58.2 billion in spending on services and $7.0 billion in spending on goods.”

US PCE data percentage change (screenshot). Source: BEA

While ending an uptrend in PCE numbers and showing the first month-on-month decline since 2020, the June print sparked conservative reactions. Trading resource The Kobeissi Letter noted that the 3.7% figure was still the second-highest result since October 2024.

“US inflation continues to run at nearly double the Fed’s 2.0% target,” it said on X.

Johns Hopkins economist Steve Hanke described inflation as “the genie the Fed just can’t put back in the bottle,” while also noting the mismatch with its 2% target.

Bitwise CIO sees BTC brushing off future rate cues

The Federal Reserve left interest rates unchanged at its latest meeting on Wednesday, with an emerging split among the Federal Open Market Committee (FOMC) members regarding appropriate policy.

Related: South Korean crypto trading surges amid stock market plunge

Following the event, Matt Hougan, chief investment officer at crypto asset manager Bitwise, forecast that future interest-rate announcements would have less impact on BTC price performance.

“Rationale: Throughout bitcoin’s history, interest rates swung wildly — from 0% to 2.5% to 0% to 5% to 3.5%.  Changes have been measured in whole percentage points. But future changes seem likely to be more modest; the CME expects a 50bps rise over the next year,” he told X followers, referring to rate expectations as measured by CME Group’s FedWatch Tool.

Fed target-rate probabilities (screenshot). Source: CME Group

Hougan said that new Fed chair, Kevin Warsh, will likely echo former chair Alan Greenspan with the scale of rate changes, diverging from his immediate predecessor, Jerome Powell.

Prior to Warsh’s appointment, US president Donald Trump gave repeated signals that he expected Warsh to adopt a dovish stance on the issue, a move that would bolster risk-asset performance.