At 20:30 Beijing time on June 10, 2026, the U.S. Bureau of Labor Statistics will release the May Consumer Price Index. This is the final key inflation data point ahead of the first FOMC policy meeting under new Fed Chair Kevin Wosch, scheduled for June 16 to 17.
Market expectations are that overall CPI year-over-year growth will rise to 4.2%, the highest since March 2023, and the first time inflation has returned to above 4% in nearly three years. Core CPI excluding food and energy is expected to come in at 2.9% year-over-year, with a monthly (month-over-month) increase of about 0.3%. Overall inflation and core inflation are showing a clear divergence in their trends.
Meanwhile, the price of Bitcoin has fallen below the $62,000 level, putting pressure down in tandem with gold. As of the time of writing, Bitcoin is trading at $61,347, and Ethereum at $1,627. Over the past 24 hours, liquidations across the entire market totaled about $426 million, with long positions accounting for more than 80%. Gold is also down for the fourth straight trading day; spot gold has fallen below $4,200, hitting the lowest level since March 23.
Why the U.S. May CPI data is making markets highly on guard
The special nature of this CPI release lies on two levels. First, it is released at a critical point when the Fed’s policy framework is facing major changes—right on the eve of the Fed’s first meeting under Wosch as chair, when the market has limited historical reference for his policy stance.
Second, the drivers of inflation have shifted. In this inflation rebound, the push is no longer driven solely by energy prices. Energy costs, tariffs, and service costs are all lifting price pressures, while wage growth continues to lag behind inflation, leaving real purchasing power under sustained pressure.
From institutional forecasts, four major Wall Street institutions—Goldman Sachs, UBS, Deutsche Bank, and Morgan Stanley—have published forward-looking reports in quick succession. Their forecasts for May’s overall CPI year-over-year growth cluster in the range of 4.17% to 4.3%, all above April’s 3.81%.
Energy is the core driver behind this inflation jump. Deutsche Bank’s calculations suggest energy inflation year-over-year could approach 24%, compared with just 0.5% in February. U.S. retail gasoline prices rose sharply in May, driving an expected monthly increase of about 6% to 7% for energy goods overall. The entire energy category is expected to rise nearly 4% month-over-month, directly pushing overall CPI above 4%.
The good news is that gasoline prices peaked around May 20 and have since pulled back by about 40 cents per gallon. UBS expects this will lead to an about 0.13% decline in June’s overall CPI month-over-month, with year-over-year falling back to 3.81%. This implies May is likely the peak for overall inflation in this cycle, but the path of inflation cooling remains highly uncertain.
How the synchronized drop in Bitcoin and gold reshapes macro hedging logic
Bitcoin and gold falling in tandem is a rare real shock to their “digital gold” and “safe haven” positioning. Previously, when concerns about inflation were rising, gold—typically a traditional safe-haven asset—would attract inflows, while Bitcoin supporters argued that its scarcity (a hard cap of 21 million BTC) gives it anti-inflation properties similar to gold.
This time, however, the situation is fundamentally different. Investors’ expectation that interest rates will rise tends to weigh on asset classes that do not generate yield—Bitcoin holders receive no interest, and gold also produces no cash flow. When market pricing shifts toward a “higher for longer” interest-rate environment, the opportunity cost of holding both assets rises in tandem.
Specifically, gold has already retraced about 23% from its historical high of roughly $5,608 in late January. Silver’s retracement is as high as 44%. Bitcoin, meanwhile, has dropped from above about $75,000 to below $62,000 over the past two weeks, a decline of more than 17%.
From an academic perspective, this synchronized selloff is not an isolated phenomenon. Research suggests no statistically significant correlation has been found between Bitcoin and inflation, and in some cases there is even a negative correlation—meaning Bitcoin’s effectiveness as a short-term inflation hedge is not stable. The market is now reassessing Bitcoin’s asset classification: is it still playing the role of gold as a safe haven, or does it continue to anchor itself to Nasdaq and display risk-asset characteristics?
Market repricing shifts from “when will rates be cut” to “whether rates will be raised”
Over the past year, trading has consistently revolved around the question of “when the Fed will cut rates.” But recently, economic data is pushing investors to face a different issue: if inflation re-accelerates in an environment where growth and employment remain resilient, will major central banks worldwide be forced to re-enter a rate-hiking cycle?
CME FedWatch data shows the probability of keeping rates unchanged in June is 99.2%. The probability of a 25-basis-point hike in July has risen to 11.3%, and rate-cut expectations have effectively dropped to zero. Looking at the full-year outlook, the probability of no rate cuts in 2026 is about 72.6%, while the probability of cumulative 25-basis-point hikes is about 17.6%.
This shift is deeply meaningful because it represents a framework-level change. The implied probability of rate hikes in the second half of the year from the interest-rate futures market has risen to about 38%. The U.S. Treasury market—at a size of $31 trillion—has already priced in expectations of Fed rate hikes ahead of time. Bond traders are betting that the earliest 25-basis-point hike will occur in October. Major Wall Street banks have largely withdrawn their previous predictions for 2026 rate cuts. BNP Paribas economists have adjusted their view to the Fed hiking at most three times, with the most likely start in December.
This is not just a policy shift within the United States; it is a global repricing of interest rates. Market expectations for the Bank of Japan to hike rates by 25 basis points to 1% next week are nearly unanimous, which would be the highest policy rate level since 1995. When the U.S., Japan, and Europe all begin discussing tightening, rising global funding costs are no longer just a problem for a single country—they evolve into a global liquidity repricing.
Key takeaways from the Fed’s June FOMC: the dot plot hints at rate-hike signals
The FOMC meeting on June 16–17 will be the first policy meeting after Wosch takes office, and how the Fed releases its policy signals could directly determine the market direction for the second half of the year. Analysts are focusing on three core observation dimensions: whether the policy statement deletes language like “looser tilt,” whether the dot plot shows rate-hike expectations, and whether the risk distribution chart tilts toward the inflation side.
The evolution of the dot plot path is especially crucial. The interest-rate forecasts in the Fed’s quarterly dot plot may soon no longer “forecast” rate cuts, and the dot plot itself might even exit the historical stage altogether. The market will then have to reassess whether Wosch is truly an inflation hawk as implied by his past remarks.
At the official level, Cleveland Fed Chair Hammack recently warned that if inflation pressure persists, officials may need to take action soon. At the April FOMC meeting, there was a policy-vote split of 8 to 4, the largest divergence record since 1992. Among the four dissenters, some supported rate cuts, while others opposed including language that tilts toward easing. These divisions will likely become more focused in the June meeting.
If the hawkish signals above appear simultaneously, it would mark a major turn in the Fed’s easing cycle since the late summer of 2024. For the crypto market, this would mean the previously expected rate-cut liquidity window would be completely shut.
Strong dollar and worsening capital outflows add pressure on crypto markets
The U.S. Dollar Index (DXY), hovering near a two-month high, exerts dual pressure on risk assets. On one hand, a stronger dollar itself lowers the price level of assets priced in dollars. On the other hand, a stronger dollar usually comes with global capital returning to U.S. markets, pulling liquidity away from emerging markets and high-risk assets.
In crypto markets, capital outflow signals are especially prominent. U.S. Bitcoin spot ETFs logged the largest single-week outflow in history—$3.4 billion—in the week ending June 5, after 13 consecutive trading days of net outflows. Persistent ETF fund outflows suggest that institutional investors are systematically cutting their return expectations for crypto assets in a rate-hike environment.
Meanwhile, Strategy sold a small amount of its Bitcoin holdings at lower levels. Although the amount is only about $2.5 million—tiny compared with its roughly $62 billion Bitcoin reserves—this move shakes confidence in the company chair’s “never sell” stance, and the signal sent to the market is far more important than the amount itself.
The divergence between crypto and tech stocks is also intensifying. The Nasdaq 100 index keeps hitting record highs, but Bitcoin keeps falling. The two are presenting one of the largest divergences in recent years. Analysts note that there is currently no phenomenon of capital rotating from tech stocks into Bitcoin; crypto needs independent fundamental catalysts to attract incremental capital.
What valuation tests do crypto assets face in a high-interest-rate environment
The impact of a high-interest-rate environment on crypto assets goes beyond the price level—it also touches the deep reconstruction of asset pricing logic. Rising rates transmit to the crypto market through three channels:
First, the opportunity-cost channel. When the risk-free rate (U.S. Treasury yields) stays above 4%, the opportunity cost of holding crypto assets that do not generate cash flows rises significantly. Especially in a “higher for longer” rate expectation environment, investors tend to reduce exposure to all asset classes that do not generate returns, including both gold and Bitcoin.
Second, the liquidity channel. Fed balance-sheet reduction is still ongoing, and expectations for synchronized tightening by major global central banks are taking shape. As bond yields continue rising, the valuation of the AI sector at around 20x price-to-earnings attracts large-scale financing that absorbs market liquidity. Overvalued, high-risk crypto assets then face a more severe competitive environment for capital.
Third, the narrative-reconstruction channel. The effectiveness of Bitcoin’s “inflation hedge” thesis is being widely questioned in this cycle. Past research shows no statistically significant relationship between Bitcoin and inflation, and in some models even a negative correlation is observed. When inflation data rises, Bitcoin does not rise but instead falls. The market begins to classify it as a risk asset (a high-beta alternative to tech stocks) rather than a safe haven, and this classification shift itself forces a rebuild of the valuation framework.
A research report from Standard & Poor’s notes that Bitcoin as a long-term hedge against currency value depreciation may have some value, but as a short-term inflation-hedging asset its effectiveness is limited. For a crypto market that relies on macro narrative pricing, narrative logic weakening is often more destructive than an immediate price drop.
Does the liquidity repricing mean the crypto market will face long-term pressure?
What needs to be watched closely is that this global interest-rate repricing may be only the beginning of liquidity contraction. Expectations that the Bank of Japan will continue hiking are strengthening. Once Japan officially enters a rate-hiking cycle, it means the ultra-easy policies that have supported global liquidity for more than a decade will be gradually withdrawn.
From the perspective of the interest-rate path, the Fed’s current policy rate is in the range of 3.50% to 3.75%. If inflation persistence remains higher than expected, rates will not only fail to decline, but could even be pushed higher further. A notable comparison is that most major Wall Street institutions previously expected the Fed to cut rates 2 to 3 times in 2026—an expectation that is being systematically dismantled.
U.S. midterm elections will be held in November, and political pressure on monetary policy cannot be ignored. But with inflation still a core voter concern, any policy easing beyond tolerated inflation levels will have to pay a high political cost.
From the angle of global capital flows, if rate-cut expectations disappear completely and rate-hike expectations harden further, the relative attractiveness of dollar assets will keep rising, and the pressure of capital outflows facing the crypto market could continue for a longer period. In addition, a series of major IPO plans—such as those by SpaceX, Anthropic, and OpenAI—may also draw away several trillion dollars of investor funds, creating additional liquidity extraction from crypto markets.
Of course, rate trends are not a one-way linear projection. If subsequent employment data weakens materially, or if oil-price shocks from geopolitical conflict reverse, market expectations could be recalibrated again. But for now, the market has already completed the framework switch from “when will rates be cut” to “whether rates will be raised.” Crypto assets will need to find new pricing coordinates in a high-rate environment for a longer period.
FAQ
Q: What are the expectations for U.S. May CPI data? How will it affect Fed policy?
Market expectations are for May’s overall CPI year-over-year growth to rise to 4.2% (the highest since March 2023), with core CPI at 2.9% year-over-year and 0.3% month-over-month. If the data meets or exceeds expectations, it will strengthen market expectations that the Fed will no longer cut rates and may even begin hiking. Currently, the probability implied by interest-rate futures for no rate cuts within 2026 is about 72.6%, and the probability of a 25-basis-point hike is about 17.6%.
Q: Why have Bitcoin and gold fallen in sync?
The main reason is the market repricing that interest-rate expectations are moving upward. Both gold and Bitcoin are assets that do not generate cash flows; rising interest rates increase the opportunity cost of holding both. Current shared expectations of “no cuts and possibly even hikes” jointly suppress the valuations of both assets, and also challenge the narrative logic of Bitcoin as an “inflation hedge.”
Q: Has the “inflation hedge” narrative for Bitcoin already failed?
Based on historical empirical data, no statistically significant positive correlation between Bitcoin and inflation has been found. Some studies even find negative correlation. As a long-term hedge against currency depreciation, Bitcoin’s fixed supply does have theoretical anti-inflation properties, but as a short-term inflation-hedging tool, its effectiveness is widely questioned in this cycle.
Q: What are the key watch items for the Fed’s FOMC meeting in June?
The June 16–17 meeting is the first FOMC meeting after the Fed’s new chair, Wosch, takes office. Three signals are in focus: whether the policy statement deletes “dovish tilt” language, whether the latest dot plot shows rate-hike expectations, and whether the risk distribution chart tilts toward the inflation side. If the above signals appear simultaneously, it would indicate a major turn in the Fed’s easing cycle since the late summer of 2024.
Q: What long-term impacts does a high-interest-rate environment have on crypto assets?
A high-interest-rate environment affects crypto assets through three channels: higher opportunity costs (holding non-yielding assets faces higher alternative costs), tighter liquidity (major global central banks tightening in sync), and asset attribute reclassification (Bitcoin being recategorized as a risk asset rather than a safe-haven asset). The long-term combination of these factors will change the crypto market’s valuation logic and the structure of capital flows.
