Cryptocurrency market maker Wintermute, one of the largest algorithmic trading firms in digital assets by trading volume, has assessed the recent price increases in Bitcoin and Ethereum following the release of June US inflation data, identifying early signs of structural recovery in the cryptocurrency market while cautioning that a definitive upward trend has not yet been established.

The US Consumer Price Index (CPI), the most closely watched inflation gauge for Federal Reserve policy decisions, declined 0.4% month-on-month in June, representing the largest monthly drop since April 2020. Annual inflation fell from 4.2% to 3.5%, coming in below market expectations of 3.8%. Following the data release, markets largely priced out the likelihood of a Federal Reserve rate hike in July.

However, renewed tensions between the US and Iran, along with fresh discussions of port blockades, drove Brent oil prices up 15.54% over the week. The Strait of Hormuz, through which roughly a fifth of global oil consumption passes, has been a recurring flashpoint in prior US-Iran confrontations.

Risk assets diverged in performance during the same period. Ethereum gained 3.64% and Bitcoin rose 1.46%, while the Nasdaq index declined 4.16%. Cryptocurrencies have in recent years exhibited a positive correlation with technology equities, particularly during periods of risk-off sentiment, making this divergence from the Nasdaq and semiconductor stocks a point of analytical focus.

In the immediate aftermath of the inflation report, Bitcoin surged from approximately $62,000 to $64,900 within a short window. Ethereum climbed as much as 7%, reaching $1,884. The rapid move triggered approximately $134 million in short-position liquidations within a single hour.

US-listed spot Bitcoin ETFs, which began trading in January 2024 and have become a significant conduit for institutional capital flows into Bitcoin, recorded net inflows of roughly $191 million on Tuesday and Wednesday, ending a ten-day streak of outflows. Wintermute described the recent inflows as a positive development but noted that, compared to the record net outflow of $4.5 billion recorded in June, the current scale remains insufficient to confirm a new trend.

According to Wintermute, Bitcoin's ability to hold its post-CPI gains during a concurrent sell-off in semiconductor stocks signals an improvement in the cryptocurrency market's underlying structure. Still, the firm stopped short of declaring a confirmed uptrend.

Wintermute outlined specific conditions that would validate the market's relative strength: spot Bitcoin ETFs recording uninterrupted net inflows for a full week, and Bitcoin's price sustaining levels above $66,000 across several trading days.

The firm also flagged potential macroeconomic risks that could undermine its cautiously optimistic assessment. If Brent oil rises above $90 or the Strait of Hormuz is officially closed, macroeconomic risks could intensify and the current positive read on the cryptocurrency market could lose its validity.