Bitcoin's Rally May Stall as Economic Indicators Point to Inflation Concerns

After reaching above $79,000, Bitcoin has pulled back to $76,500 from $78,424.55, pausing its rally from late March's lows below $65,000. However, recent economic data does not support a significant bullish surge. The University of Michigan's consumer sentiment index has dropped to a record low of 49.8, driven mainly by inflation pressures 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 rise in inflation expectations could limit the Federal Reserve's ability to signal interest rate cuts, potentially capping gains in BTC and other risk assets. Analysts note that the sharp increase in long-term expectations is particularly concerning for the Fed, as it suggests inflation psychology may be 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 Bank of Japan rate increase in June. Meanwhile, sustained ETF inflows are crucial for supporting spot BTC, and coordinated industry efforts have helped DeFi tokens hold up better than the broader market. Bitcoin's price swings since late March indicate a potential exhaustion of the uptrend and scope for a deeper price pullback, unless it reclaims its 50- and 200-hour averages.