Inflation Surges Again in June, Bitcoin Slides, Stocks Open Lower

key takeaways

Annual inflation hit 9.1% in June, surpassing analysts’ expectations yet again
Core CPI reached 5.9%, also coming in hotter than expected

Annual inflation rose again in June, surpassing analyst expectations to reach 9.1%, the highest level since 1981, according to the latest Consumer Price Index (CPI) report released Wednesday.

Core CPI, which excludes volatile food and energy prices, hit 5.9% in the 12 months ending in June.

Bitcoin and ether both slid immediately following the release of the report, losing 2.5% and 3.4%, respectively. Equities also opened lower at the start of Wednesday’s trading session. The tech-heavy Nasdaq lost 1.6%, and the S&P 500 kicked off the day 1.4% lower.

Analysts were unsurprised by the markets’ reaction, as investors move away from risk assets as prices continue to rise.

“You have multi-decade high inflation, low economic growth and [the] end of easy monetary policy,” Fawad Razaqzada, financial markets analyst at investment firm City Index, said. “The big sell-off in equity markets and the weakness in gold means investors have less disposable money to put to work, especially in highly speculative crypto markets.”

Wednesday’s numbers paint an unfortunate picture for Federal Reserve officials seeking to curb inflation. In June, central bankers opted to raise interest rates 75 basis points, and analysts anticipate an equal or greater hike later this month, putting a definitive end to the pandemic-era strategy.

The Producer Price Index (PPI) report will be released Thursday, which shows how prices are rising from manufacturers’ perspective. The Fed’s preferred measure of inflation is the core personal consumption expenditures price index, the PCE, which will be released on July 29.

“As much as CPI matters, there is a school of thought that says PPI provides useful information about the direction of consumer inflation,” Nicholas Colas, co-founder of DataTrek Research, said. “If producer inflation has peaked and is starting to decline, consumer inflation should follow along in the same direction since it is the last stop on the road that starts with raw materials and ends with personal consumption.”

The move out of risk assets is likely to continue, Razaqzada said, and cryptocurrencies are sure to struggle for the foreseeable future.

“It is no surprise why investors are so bearish on cryptos right now,” Razaqzada said. “The way prices have collapsed makes you wonder whether cryptos will ever experience the same sort of mania we saw post Covid and previously in 2017…troubled crypto lenders, worthless coins, difficulty withdrawing funds and collapsed hedge funds all underscore the risks investors face.”

Get the news in your inbox. Explore Blockworks newsletters:

The Breakdown: Decoding crypto and the markets. Daily.
Empire: Crypto news and analysis to start your day.
Forward Guidance: The intersection of crypto, macro and policy.
0xResearch: Alpha directly in your inbox.
Lightspeed: All things Solana.
The Drop: Apps, games, memes and more.
Supply Shock: Bitcoin, bitcoin, bitcoin.