Crypto shows resilience

Macro

June CPI fell 0.4% MoM, the largest single-month decline since April 2020, pulling headline inflation to 3.5% from 4.2% against a 3.8% consensus, with core flat on the month at 2.6% YoY. The decline was almost entirely an energy artefact, with gasoline down 9.7% capturing June's ceasefire lull in crude, and that lull ended this week. Renewed US strikes on Iran and a Chinese open-source AI release turned the best inflation print in six years into a losing week for equities.Brent topped the scoreboard at +15.54% as the war premium rebuilt, followed by ETH at +3.64% and BTC at +1.46%, with 20Y+ Treasuries flat at +0.06%, altcoins at -0.41%, the Russell 2000 at -0.66%, the S&P 500 at -1.54%, gold at -2.28% and the Nasdaq at the bottom on -4.16%. Gold falling 2.28% into an escalating war reads as the metal having been held as an inflation hedge rather than a haven, and the CPI took that leg out

The market cut September hike odds to 63% from above 75% on the print and took July off the table entirely, with the 28 and 29 July FOMC under Warsh now priced as a hold. That pricing rests on crude in the low $70s, and crude no longer trades there, so July's inflation data deteriorates mechanically if Brent holds the mid-$80s, which makes the statement's energy pass-through language the meeting's real content.

Brent traded as high as $87 intraday on Tuesday, its first visit to that level since June, after Washington reinstated the naval blockade of Iranian ports and extended strikes into a fourth consecutive night, with tanker transits through Hormuz slowing to a trickle as insurers and charterers pulled back. Trump dropped the proposed Strait transit fee but warned of strikes on Iranian bridges and power plants next week absent a deal, so the escalation path remains open into the FOMC.

Moonshot's open-weight Kimi K3, released Wednesday and claiming parity with frontier models from OpenAI and Anthropic, hit the AI complex directly, with TSMC falling 7% Friday despite reporting a 77% jump in quarterly operating profit as the SOX printed its worst week in more than 15 months and Nvidia briefly ceded the top market cap spot to Apple. The release challenges the assumption that frontier capability requires proportional chip spend, therefore AI capex guidance from the mega-cap earnings wave over the next fortnight is now the single number that matters for the equity tape.

Crypto sat inside all three currents and, unusually for this year, came out the strongest risk asset on the board.

Digital Assets

BTC ran from roughly $62k to $64.9k within minutes of Tuesday's CPI release while ETH jumped 7% to $1,884, with CoinGlass counting around $134M of short liquidations in the first hour as crowded bearish positioning was forced to cover. Wednesday's PPI miss, down 0.3% MoM against a flat consensus, extended the move to an intraday high of $65.5k.

The fresh-capital test sits in the ETF tape, where roughly $191M of net inflows across Tuesday and Wednesday snapped a ten-day outflow streak worth $2.73B. Set against June's record $4.5B monthly outflow that is a down payment rather than a trend, which is why the stance below hangs on whether the inflows extend.

The most telling fact of the week is that BTC held its post-CPI gains straight through Friday's chip rout instead of trading as the high-beta tail of the AI liquidity trade. For most of this year the marginal risk dollar has had to choose between AI equities and crypto, and crypto has lost that contest, so a week where the SOX falls double digits while BTC finishes green at least suggests capital exiting stretched AI positioning can treat BTC as the cleaner liquidity expression rather than selling both.

There’s also been some chatter in the market about supply moving around. US government wallets moved $288M of seized coins, roughly 3,800 BTC and 30,000 ETH from the Farace, BTC-e and Krewson forfeitures, to Coinbase Prime on Monday, and while a custody transfer confirms no sale, the assets now sit one hop from a venue. While noteworthy, we note that these type of headlines pop up from time to time and grab outsized mindshare in the market versus their realistic and likely impact.

Our take:

“Crypto stands out for its relative strength this week"

The disinflation that drove the week was manufactured by crude in the low $70s, and with Brent settling near $85 the July prints will hand some of it back, so the FOMC hold itself looks settled and the energy pass-through language in the statement becomes the actual event.

On crypto, this week showed repaired market structure rather than a confirmed trend, because the CPI move was assisted by some short covering and two days of ETF inflows do not offset a record outflow month.

The relative-strength read gets confirmation if ETF net flows stay positive through a full week and BTC holds convincingly at these recently posted >66k levels for a few sessions. It gets invalidated if Brent takes out $90 or a formal Hormuz closure is announced, either of which reprices the whole disinflation trade in a single headline.

Key catalysts for the week ahead are UK CPI on Wednesday 22 July, the ECB decision on Thursday 23 July, the front of the US mega-cap earnings wave with AI capex guidance in focus, and the FOMC on 28 and 29 July.