Rate Hike Odds Boost Crypto Demand Amid Dollar Weakness

The latest jobs report has sparked a market reaction, with rate-hike odds increasing to 20.8% according to the CME FedWatch Tool. However, this shift in expectations is not bearish for the crypto market. In fact, investors are seeking debasement hedges as the US dollar's weakness and elevated inflation create an attractive environment for Bitcoin.

The 'debasement' narrative has been shaping the Q2 cycle so far, with the US Dollar Index down over 2% in Q2. This decline is being driven by the Fed's repeated liquidity injections, which have kept pressure on the dollar and capped Treasury yields. As a result, Bitcoin is gaining strength against gold, with the BTC/XAU ratio up 16.5% in Q2.

Institutional flows are also tracking this move, with BTC ETFs pulling in $1.25 billion in net inflows so far this year. This trend could continue if more capital rotates into crypto, further supporting demand for Bitcoin as a debasement hedge.