Bitcoin's Rally Stalls as Economic Indicators Signal Caution

After reaching above $79,000 earlier in the week, Bitcoin has retreated to $76,500, halting its upward momentum from late March's lows below $65,000. However, recent economic data suggests that a rapid resurgence may not be imminent. The University of Michigan's consumer sentiment survey revealed a record-low index of 49.8, driven primarily by inflation concerns related to the Iran conflict. Furthermore, inflation expectations have surged, with the one-year gauge increasing to 4.8% in April, and long-term expectations reaching 3.5%, the highest since October 2025. This rise in inflation expectations could limit the Federal Reserve's ability to signal interest rate cuts, potentially capping gains in Bitcoin and other risk assets. Analysts warn that the sharp increase in long-term expectations is particularly concerning for the Fed, 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 pricing in a potential rate increase by the Bank of Japan in June. In the crypto market, sustained ETF inflows are crucial for supporting Bitcoin's spot price, while coordinated industry efforts have helped DeFi tokens hold up relatively well despite the KelpDAO exploit. The CoinDesk DeFi Select Index has gained 0.5% over 24 hours, outperforming the broader market. Bitcoin's hourly price swings have broken out of an ascending trendline, and prices are trading below their 50- and 200-hour averages, indicating potential for a deeper price pullback.