After reaching above $79,000, Bitcoin has retreated to $76,500 from $78,192.97, halting its rally from late March's low of below $65,000. Recent economic data suggests that a rapid recovery may not be imminent. The University of Michigan's Consumer Sentiment Index has fallen to a record low of 49.8, driven primarily by 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, and long-term expectations increasing to 3.5%, the highest since October 2025.
This rise 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 increase in long-term expectations is particularly concerning for the Fed, as it may indicate that inflation psychology is becoming unanchored. The Fed is expected to maintain its benchmark interest rate between 3.5% and 3.75% this Wednesday, while 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 prices, and coordinated industry efforts have helped DeFi tokens hold up relatively well despite the KelpDAO exploit. The CoinDesk DeFi Select Index has gained 0.5% over 24 hours, outperforming the broader market. Bitcoin's price swings since late March indicate uptrend exhaustion, with prices trading below their 50- and 200-hour averages, suggesting a potential deeper price pullback.