Bitcoin's Rally Loses Steam as Economic Indicators Point to Caution

After reaching highs above $79,000, Bitcoin has retreated to $76,500, stalling its recent surge from lows below $65,000 in late March. However, recent economic data suggests that a swift rebound may not be on the horizon. The University of Michigan's Consumer Sentiment Index has fallen to a record low of 49.8, driven largely by inflation concerns linked to the Iran conflict. Furthermore, inflation expectations have risen sharply, with the one-year gauge increasing 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 cut interest rates or ease liquidity in the near term, as it may reinforce inflationary pressures. As a result, the Fed's hawkish stance 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 variable in assessing whether inflation psychology is becoming unanchored. With the Fed expected to maintain its benchmark interest rate between 3.5% and 3.75% this Wednesday, traders are also pricing in a potential Bank of Japan rate increase in June. In the crypto market, sustained ETF inflows are crucial for supporting spot Bitcoin prices on dips. Meanwhile, coordinated industry efforts to contain the fallout from the KelpDAO exploit have helped DeFi tokens hold up better than the broader market. The CoinDesk DeFi Select Index gained 0.5% over 24 hours, decoupling from the CoinDesk 20's 1.5% decline. Looking at the charts, Bitcoin's hourly price swings since late March show that prices have broken out of an ascending trendline, trading at a discount to their 50- and 200-hour averages, pointing to uptrend exhaustion and scope for a deeper price pullback.