Bitcoin subdued at $62k amid US-Iran escalation; May CPI meets expectations

Bitcoin edged lower on Wednesday, tracking a broader decline in risk-driven markets as fresh military action between the U.S. and Iran dampened hopes for a peace deal in the Middle East. 

Losses came even as institutional selling showed some signs of cooling after three straight weeks of heavy outflows from spot exchange-traded funds. 

Bitcoin slipped 0.2% to $62,304.5 by 09:45 ET (13:45 GMT). The world’s largest crypto wiped out most of a brief rebound seen earlier this week after top corporate holder Strategy Inc (NASDAQ:MSTR) bought more of the coin. 

Bitcoin spooked by US-Iran escalation

Losses in Bitcoin came amid a broader rout in risk-driven assets, especially equities, as investors pivoted into the dollar and other safe havens. 

Iran launched missile and drone attacks as U.S. military bases and several other targets in the Middle East, retaliating for earlier American attacks near the Strait of Hormuz. 

The renewed hostilities stemmed from the downing of a U.S. helicopter in Hormuz earlier this week. 

Wednesday’s attacks further undermined hopes for a U.S.-Iran peace deal, despite repeated claims from U.S. officials that a deal was close.

Oil prices surged after the latest hostilities, keeping markets on edge over the inflationary impact of the war and its effect on interest rates. 

Meanwhile, cooling capital outflows from spot ETFs lent Bitcoin some relief. Data from SoSoValue showed a total $168 million in outflows so far this week, after over $5 billion in outflows over the past three weeks battered crypto markets. 

In-line inflation data backs Fed pause in June

U.S. consumer price index inflation data for May came in line with estimates, reinforced market expectations that the Federal Reserve will hold rates steady at its June meeting. 

The Consumer Price Index climbed 4.2% from a year earlier, matching economist forecasts and accelerating from a 3.8% gain in April, the Bureau of Labor Statistics said Wednesday. On a monthly basis, prices rose 0.5%, also in line with expectations and slightly below April’s 0.6% increase.

Core inflation, which strips out volatile food and energy prices, came in a touch softer than anticipated, rising 0.2% month-over-month against a forecast of 0.3% and slowing from April’s 0.4% pace. On an annual basis, core CPI rose 2.9%, matching expectations and edging up from 2.8% the prior month.

The print comes after readings for March and April both showed a sharp energy-driven increase in inflation.

The May data strengthened expectations that the Fed will hold rates steady in the 350-375 basis point range at its June 17 meeting, though traders continue to price in a 25 basis point increase before year-end.