Bitcoin could gain support from cooling inflation and fading expectations for another Federal Reserve rate hike, according to Wolfe Research Chief Economist Stephanie Roth. The cryptocurrency climbed to a three-week high of $65,000 following the inflation report, lifting sentiment across the broader market. Prediction platform Polymarket now assigns a 96% probability that the Federal Reserve will not raise interest rates, up from roughly 60% earlier this week.

Inflation Trends and Fed Policy

In an interview with Anthony Pompliano on July 16, Roth highlighted her expectations of a slowdown in inflation through the summer as several temporary pressures begin to fade. Roth outlined that the impact of tariff-related price increases has been smaller than feared and should continue to ease as the economy moves further past the initial impact. AI-related inflation could also moderate as it would become disinflationary over the longer term with companies using the technology to cut costs and improve productivity.

The cooler CPI report significantly reduced the likelihood of a July rate hike. Roth said a rate cut remains unlikely this year unless the labor market weakens materially. Core inflation is still running near 3%, well above the Fed’s 2% target. However, simply removing expected rate hikes could ease financial conditions.

Market Implications for Bitcoin

Bond yields could decline as traders price out additional tightening, supporting equities, cryptocurrencies and other risk-sensitive assets. Bitcoin typically benefits when traders expect lower interest rates and easier liquidity conditions because investors become more willing to hold volatile assets. The latest inflation report weakens one of the market’s biggest bearish catalysts: renewed Fed tightening.

Bitcoin could also benefit if declining inflation revives the debasement trade, particularly if government spending and global money supply continue to expand while real interest rates decline. However, Roth said Bitcoin and gold are increasingly trading on fundamentals rather than fears that the Fed will lose its independence or allow inflation to spiral.

BlackRock Inc. CEO Larry Fink stated on Wednesday that Bitcoin has more stability at current levels, with excessive leverage largely washed out of the system. Speaking in an interview with CNBC, Fink expressed that he was previously worried about too much leverage in Bitcoin and the broader cryptocurrency market, which led to a market washout. He now observes that capital markets have comparatively less implicit leverage, adding that he is very bullish on the markets over the next 12 months.

Market Stability and Leverage

Fink attributed the current stability to the removal of excess risk from the system. Bitcoin crashed in early October last year after surging to its all-time high, wiping out tens of billions in value and triggering the largest liquidation event in crypto history. Some observers have described this sell-off as a necessary reset that flushed out excess leverage and established a base-building phase before the next potential upward movement.

Evolution of Stance

Fink’s views on Bitcoin have evolved significantly over time. In 2017, he famously stated that Bitcoin demonstrated the demand for money laundering in the world. His skepticism has since evaporated; last year, he praised Bitcoin as a remedy for economic and political uncertainties, projecting a potential price rise to $700,000 if the concept gains global acceptance. Notably, BlackRock recommends a 1% to 2% allocation to Bitcoin in traditional multi-asset portfolios.

Financial Performance

BlackRock’s second-quarter results topped Wall Street expectations, driven by record inflows, revenue, and earnings. Assets under management increased 22% year-over-year to a record $15.34 trillion.

At the time of writing, Bitcoin was exchanging hands at $64,590.98, down 0.21% in the last 24 hours. BlackRock shares fell 0.08% in after-hours trading after closing 6.63% higher at $1093.40 during Wednesday’s regular trading session.