Inflation stickiness and strong employment data challenge cryptocurrency's narrative of interest ra

The data repeatedly contradicts the expectations of cryptocurrency traders

The latest U.S. economic data once again runs counter to the market narrative-in the week ending July 25, the number of initial jobless claims was 197,000, and the core PCE price index in June recorded a year-on-year increase of 3.3%. These signals indicate that the labor market remains tight and price pressures have not subsided quickly. Although the data was lower than the expected 200,000 applicants and was in line with inflation forecasts, the combination left little room for the aggressive interest rate cut that digital asset investors had expected at the end of 2026.

So far this year, Bitcoin and Ethereum have responded decisively to every change in the Federal Reserve's expectations. When weak data appeared, cryptocurrencies immediately rose; when hawkish rhetoric reappeared, the rally stopped abruptly. This dynamic is not new, but it is becoming increasingly difficult to predict because the macro situation is never stable. Today's data released did not refute the argument for a soft landing, but it undoubtedly continued to put pressure on markets that were almost certain that interest rate cuts were imminent.

The number of initial jobless claims was 197,000, which was lower than the market's general expectation of 200,000. The previous week's data was only slightly revised up to 188,000. This level of claims is low enough to indicate that employers are still retaining employees and that a wave of layoffs has not yet emerged. At the same time, the Fed's preferred inflation indicator-the core personal consumption expenditure index-rose 3.3% year-on-year in June, in line with expectations, but only slightly improved from 3.4% in the previous month. Progress is slow.

This is crucial to the structure of the cryptocurrency market because it directly affects the cost of capital. If the Fed stays at high interest rates for longer, the dollar will remain strong and liquidity will become tighter. Historically, this environment is not conducive to speculative assets that rely on cheap leverage. However, this year's cryptocurrency market has not responded uniformly as a whole. Some sectors have completely divorced from macro correlations, while other sectors are still closely connected to them.

The Fed is in no hurry to act, which poses a challenge to leverage.

The central bank's communication has been consistent: Before cutting rates, continued evidence is needed that inflation is moving towards the 2% target. The core PCE index reading of 3.3% did not provide this evidence. Given that the labor market is still absorbing jobs, the Fed has no sense of urgency. This puts interest-rate sensitive cryptocurrency strategies-especially those that rely on borrowing stablecoins or leveraged futures-at risk if the timeline for interest rate cuts is postponed until 2027. We have seen repricing in DeFi lending agreements, and fund utilization rates reflect cautious position placement.

At the same time, the regulatory background has added another layer of complexity. While macro data dominates daily price movements, structural developments in Washington are creating parallel narratives. Major legislation under consideration in the Senate could redefine the way institutions interact with digital assets, and a clearer regulatory framework might offset some of the macro headwinds. However, the impact of the bill text is far less than that of CPI data, which can directly shake the market.

Which parts of the cryptocurrency space are ignoring the noise

Not all tokens are falling. The weekly increase list shows that specific catalysts still have influence. Tokens such as TON and SIREN recorded significant gains due to network-specific news rather than macro capital flows. This differentiation shows that although the macro environment has laid the overall tone, developments at the chain and protocol levels can still dominate the market in the short term. This fragmentation is increasingly becoming a narrative theme in 2026: a market where Bitcoin and Ethereum trade like macro assets, while other assets run at their own pace.

Real-world asset tokenization is another area of continued expansion that is unaffected by Fed timing. Recent data shows that the total scale of RWAs in the chain has exceeded US$20 billion, and many major institutional transactions have been completed. This growth is driven by settlement efficiency and revenue needs, rather than expectations of interest rate cuts. It reminds us that the crypto infrastructure layer is maturing and its development does not require the support of the dovish Federal Reserve.

Remaining uncertainties

The biggest open question is not whether inflation will fall further-it is almost certain, but at a tormenting pace. The uncertainty is whether risky assets can maintain their current valuations if the market starts to rule out interest rate cuts in the next 12 months. Cryptocurrencies have shown the ability to move sideways over the long term, but market sentiment can shift rapidly when the macro narrative changes. The next few PCE data will be crucial, and traders are likely to return to data mining mode: any higher-than-expected rise in inflation could trigger more drastic deleveraging than in previous months.

For now, the message is clear. The U.S. economy is cooling not fast enough to justify the monetary easing policy that many cryptocurrency participants previously viewed as a benchmark scenario. This does not mean that trading logic has failed, but it does suggest that the risk of a quick policy shift seems greater than it did a month ago. Attention now turns to the next meeting of the Federal Reserve and whether officials view the data as a temporary stagnation or a signal that the last mile of the fight against inflation will be longer than anyone hopes.