Why is Crypto Down and Will it Recover? Options and Inflation Reveal Smoking Gun

Yahoo News · Jun 26, 2026

Why is Crypto Down and Will it Recover? Options and Inflation Reveal Smoking Gun

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Why is Crypto Down and Will it Recover? Options and Inflation Reveal Smoking Gun

The Federal Reserve's most-watched inflation gauge slammed a three-year high Today, as the Commerce Department revealed consumer prices soared a shocking +4.1% in May 2026.

Now you might be thinking, "Wait, oil prices have fallen, why is inflation still high?" And the answer is more nuanced than the lagging market impact of May's peak oil pricing.

Back in April, J.P. Morgan's Chief Global Strategist, David Kelly, flagged that short-term inflation is partly attributable to the so-called "tsunami of spending" flooding into AI development, infrastructure, and usage.

Kevin Warsh knows this; it's nothing new. He himself claimed that the productive growth and savings from AI would eventually lead to AI-powered disinflation.

But it's clear Kelly believes there is little prospect of Warsh flying in with lower rates for relief, with existential risk from Iran, mid-terms, and tariffs creating more 'if' conditions than certainty, and this remains the case as of Warsh's first FOMC meeting last week, which saw rates hold steady.

"It still looks like May was the peak in the latest bout of inflation, and falling inflation for the rest of the year could be just enough to keep the Fed on hold," claimed Kelly in his insights on Warsh's first FOMC.

Inflation Was the Trigger, but Tomorrow's $10Bn Bitcoin Options Expiry is the Smoking Gun

If macro stress on the horizon triggered the downside move below $60,000 earlier Today, then an upcoming mass options expiry event Tomorrow could well be the smoking gun, especially paired with a low-volume bear-market summer weekend.

$10Bn worth of Bitcoin options is set to expire on Deribit Tomorrow, representing about 37% of open interest in the entire Bitcoin market, and with the majority of call contracts now out of the money, it seems put positions will carpe diem with thin liquidity on the last weekend of June, and Bitcoin price will follow.

This is especially true when we remember that the macro stress is likely to compound this bearish sentiment, with contracting liquidity never a good sign for crypto markets.

This article has been published in Yahoo.com via Yahoo News.