Bitcoin's Rally Faces Hurdles as Economic Indicators Point to Caution

After reaching above $79,000, Bitcoin has retreated to $76,500, halting its upward momentum from the lows of below $65,000 in late March. Those anticipating a rapid recovery should note that recent economic data does not support a significant bullish movement. The University of Michigan's Consumer Sentiment Index has dropped to a record low of 49.8, primarily driven by inflation concerns linked to the Iran conflict. Inflation expectations have also increased, with the one-year gauge rising to 4.8% in April, up from 3.8% the previous month. Long-term expectations have reached 3.5%, the highest since October 2025. This surge in inflation expectations could limit the Federal Reserve's ability to signal interest rate cuts, potentially capping the upside for Bitcoin and other risk assets. Analysts warn that the long-term expectations shift is particularly concerning for the Federal Reserve, as it may indicate that inflation psychology is becoming unanchored. The Fed is expected to maintain its benchmark interest rate between 3.5% and 3.75% this Wednesday. Meanwhile, traders are also anticipating a potential Bank of Japan rate increase in June. Sustained ETF inflows remain crucial for supporting spot Bitcoin prices. Coordinated industry efforts to mitigate the KelpDAO exploit have helped DeFi tokens hold up better than the broader market. The CoinDesk DeFi Select Index has gained 0.5% over 24 hours, decoupling from the CoinDesk 20's 1.5% decline. Bitcoin's hourly price swings have broken out of an ascending trendline, with prices trading at a discount to their 50- and 200-hour averages, indicating potential for a deeper price pullback.