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

After reaching above $79,000, Bitcoin has retreated to $76,500, halting its surge from late March's low of below $65,000. However, recent economic data suggests that a rapid recovery may not be imminent. The University of Michigan's Consumer Sentiment Index has dropped to a record low of 49.8, primarily driven by inflation concerns related 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. These rising inflation expectations could limit the Federal Reserve's ability to cut interest rates or implement liquidity easing measures, potentially capping the upside for Bitcoin and other risk assets. Analysts warn that the sharp increase in long-term expectations is particularly concerning for the Fed, as it may signal 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 interest rate hike by the Bank of Japan in June. In the crypto market, sustained ETF inflows are crucial for supporting Bitcoin prices. Coordinated industry efforts to mitigate the impact of the KelpDAO exploit have helped DeFi tokens perform relatively 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, and prices are trading below their 50- and 200-hour averages, indicating potential for a deeper price pullback.