Bitcoin’s PPI rate-hike odds connection played out in real time on Wednesday as softer-than-expected producer inflation data sent the July Federal Open Market Committee (FOMC) hike probability collapsing, lifting BTC back above $65,000 and the broader crypto market cap above $2.3 trillion.
PPI Undershoots, Rate-Hike Probability Collapses
The Bureau of Labor Statistics reported that headline PPI fell 5.5% year over year in June, below the 6.2% consensus estimate. Monthly producer prices declined 0.3%, the sharpest single-month drop since April 2025.
Core PPI, excluding food and energy, came in at 4.7% annually against an expected 5.1%, with the monthly print at 0.2% versus the 0.3% forecast.
The data landed one day after June CPI also missed to the downside. According to the BLS, the Consumer Price Index fell 0.4% on a seasonally adjusted monthly basis in June and rose 3.5% over the prior 12 months. Core CPI was unchanged on the month and up 2.6% year over year. That monthly decline was the largest since April 2020.
Together, the two prints have redrawn the rate-hike probability curve sharply. According to the CME FedWatch Tool, the probability of a hike at the July 29 FOMC meeting now stands at 10.2%, down from roughly 16% following the CPI release. That compares with a pre-PPI peak of 46.5%, per CNBC, which had risen from 34% on Sunday as oil prices climbed on U.S.-Iran developments.
One caveat: the Investing.com Fed Rate Monitor Tool, also drawing on CME Group 30-day fed funds futures, shows the 25-basis-point hike scenario at 32.1% with no change at 67.9% for July 29. The two tools use different methodological snapshots, so CME FedWatch remains the more widely cited figure; the gap between them reflects either a timing difference or a differing calculation methodology.
Crypto-native prediction markets are further out. Polymarket places the July hike probability at just 4%, a wide spread from both CME readings. Markets have also pulled back on year-end tightening bets: CME FedWatch puts the odds of at least one additional hike before end-2026 at roughly 51%, down from around 55% the prior day and a recent peak of about 71%.
Warsh Signals a ‘Sea Change’ While Keeping the Door Open
Federal Reserve Chair Kevin Warsh testified before the House Committee on Financial Services on 14 July 2026, in what was his first congressional hearing since taking the role. The Hill reports that Warsh touted what he called a ‘sea change’ in the Fed’s thinking on inflation and laid out substantial changes he regards as necessary to correct mistakes made by his predecessors.
In his prepared testimony, Warsh stated: ‘The Fed’s number one objective is to get monetary policy right… And if we get policy right, and we will, the inflation surge of the last five years will be a thing of the past.’
He was careful not to declare progress too quickly, consistent with his line in the earlier House session that one encouraging inflation print does not mean the job is finished. The Fed’s stated target remains 2%: core CPI at 2.6% is close but not there, and core PPI at 4.7% is well above it.
On crypto specifically, The Hill reports Warsh said the Fed will ‘do everything we can to mitigate’ risks in the crypto market, but added that if such risks materialise during his term, he wants ‘to be in a position where we’re not bailing out anybody,’ including the Fed itself.
Bitcoin and Ethereum Respond to the Macro Shift
Bitcoin’s move back above $65,000 extended the rally that began after the CPI release. Ethereum cleared $1,900 for the first time since early June. The total crypto market capitalisation gained more than 2% on the session.
The macro logic is straightforward: lower rate-hike probability reduces the opportunity cost of holding non-yielding assets and compresses the dollar premium. Both BTC and ETH are sensitive to this trade, and positioning had clearly been leaning defensive given how far hike odds had climbed earlier in the week.
The next hard data point is the July 29 FOMC decision itself. If the Fed holds, as current pricing implies, the question shifts to how quickly core inflation can close the remaining gap to 2%, and whether Warsh’s ‘sea change’ framing translates into anything more dovish than his predecessors’ terminal-rate rhetoric.
