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

After reaching above $79,000, bitcoin has retreated to around $76,500, putting the brakes on its upward momentum from late March's lows below $65,000. However, recent economic data suggests that a rapid resurgence may not be on the horizon. The University of Michigan's consumer sentiment index has dropped to a record low of 49.8, primarily due to inflation concerns linked 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 signal interest rate cuts, potentially capping the upside for bitcoin and other risk assets. Analysts warn that the sharp rise in long-term expectations is particularly concerning for the Fed, as it raises the bar for any near-term easing. The Federal Reserve is expected to maintain its benchmark interest rate between 3.5% and 3.75% this Wednesday. Meanwhile, traders are also anticipating a potential rate increase by the Bank of Japan in June. In the crypto market, sustained ETF inflows are crucial for supporting bitcoin's price on dips. Coordinated industry efforts have helped DeFi tokens hold up relatively well despite the KelpDAO exploit. The CoinDesk DeFi Select Index gained 0.5% over 24 hours, outperforming the broader market. Bitcoin's price has broken out of an ascending trendline, and its hourly price swings are trading at a discount to their 50- and 200-hour averages, indicating potential for a deeper price pullback.