Bitcoin's Rally Faces Hurdles as Economic Indicators Signal Caution

After reaching above $79,000 earlier in the week, Bitcoin has retreated to around $76,500, stalling its rally from the late-March lows below $65,000. 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 fallen to a record low of 49.8, primarily due to inflationary pressures related to the Iran conflict. Inflation expectations have also increased, with the one-year gauge rising to 4.8% in April from 3.8% the previous month, and long-term expectations reaching 3.5%, the highest since October 2025. This surge in inflation expectations could limit the Federal Reserve's ability to cut interest rates or provide liquidity easing, as it may exacerbate inflationary pressures. As a result, the Fed's hawkish stance could cap the upside or slow gains in Bitcoin and other risk assets. Analysts at Bitfinex noted that the long-term expectations shift is the more concerning data point for the Federal Reserve, as it raises the bar for any near-term easing pivot. 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 Bank of Japan rate increase in June. Timothy Misir, head of research at BRN, stated that rate hikes this month are unlikely, and financial bets suggest more than two rate increases in the eurozone and the U.K. before the end of the year. A June hike is almost fully priced in. On the crypto side, sustained ETF inflows are crucial to supporting spot Bitcoin prices on dips. Coordinated industry efforts to contain the fallout from the KelpDAO exploit have helped DeFi tokens hold up better than the broader market. The CoinDesk DeFi Select Index gained 0.5% over 24 hours, decoupling from the CoinDesk 20's 1.5% decline. Bitcoin's hourly price swings show that it has broken out of an ascending trendline that guided its upward trajectory since early this month, and prices are trading at a discount to their 50- and 200-hour averages, indicating uptrend exhaustion and potential for a deeper price pullback.