After reaching highs above $79,000, Bitcoin has retreated to around $76,500, putting the brakes on its rally from late March lows of under $65,000. However, recent economic data suggests that a swift rebound may not be on the cards. The University of Michigan's Consumer Sentiment Index has dropped to a record low of 49.8, driven primarily by inflation concerns linked to the Iran conflict. Inflation expectations have also surged, with the one-year gauge jumping to 4.8% in April, up from 3.8% the previous month.
Long-term expectations have risen to 3.5%, the highest since October 2025. This sharp increase could limit the Federal Reserve's ability to cut interest rates or ease liquidity in the near term, as it may exacerbate inflationary pressures. As a result, the Fed may adopt a more hawkish stance, potentially capping gains in Bitcoin and other risk assets.
Analysts warn that the long-term expectations move is particularly concerning, as it suggests that inflation psychology may be becoming unanchored. The Federal Reserve 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 spot Bitcoin prices.
Coordinated industry efforts to mitigate the impact of the KelpDAO exploit have helped DeFi tokens perform relatively well, with the CoinDesk DeFi Select Index gaining 0.5% over 24 hours. The Bitcoin price has broken out of an ascending trendline, and prices are trading below their 50- and 200-hour averages, indicating potential for a deeper price pullback.