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

After reaching highs of over $79,000, Bitcoin has retreated to $76,500, pausing its rally from the lows of below $65,000 in late March. However, recent economic data suggests that a swift return to its upward trend may be unlikely. The University of Michigan's Consumer Sentiment Index has dropped to a record low of 49.8, largely due to inflation concerns related to the Iran conflict. Inflation expectations have also surged, with the one-year gauge rising to 4.8% in April, up from 3.8% the previous month. Long-term expectations have increased to 3.5%, the highest since October 2025. This sharp rise in inflation expectations could limit the Federal Reserve's ability to cut interest rates or ease liquidity in the near term, as it may reinforce inflationary pressures. As a result, this could cap the upside or slow the gains in Bitcoin and other risk assets. Analysts note that the long-term expectations move is particularly concerning for the Federal Reserve, as it is a key indicator of whether 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 rate hike 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 to mitigate the impact of the KelpDAO exploit have helped DeFi tokens perform relatively better than the broader market. The CoinDesk DeFi Select Index gained 0.5% over 24 hours, outperforming the CoinDesk 20's 1.5% decline. Bitcoin's price has broken out of an ascending trendline, and its prices are trading at a discount to their 50- and 200-hour averages, indicating potential for a deeper price pullback.